As 2012 is the Presidential election year in US, a lot of debate is going on against “Outsourcing”, both from President Obama who is seeking re-election for his second term and his opponent Gov. Mitt Romney. Already, they are trading charges against each other related to job loss and outsourcing. Interestingly, neither of them is very specific on what type of outsourcing is bad for American economy; neither has shown any specific data or research to prove any of their points. Anyway we all know that elections are about creating an emotional appeal, which brings voters to vote for them.
Going through many newspaper reports, TV coverage and the Internet, I found that even though both contestants are targeting outsourcing as one of the main reason for decline in jobs, actually they both meant off-shoring of jobs to other countries. Outsourcing is when a business decides to get product or services from some other firm that can produce same product or service cheaper or better than they can. Take for example all automobile makers outsource products such tyres, batteries etc. from others. Why doesn’t GM or Ford start making tyres and batteries themselves? Simple – it’s not in their best interest to produce these products in house. Same applies when we outsource services e.g. most small/medium businesses outsource payroll, accounting, Legal or IT services from a provider that is specialised in those services and these services are the “core competence” of the provider. The provider also have economies of scale, therefore the end consumer has an economical product or service that is most often of higher quality standard.
Look at this from another prospective – when products and services are outsourced, the products and services become economical. As a result of these economies of scale, more consumers can afford to buy the product and in the process more demand gets created. That is sustainable outsourcing.
Often outsourcing and off-shoring get mixed; in off-shoring the real benefit is not directly felt by people who lost their jobs and the process takes longer time. I would like to give an example – look at how many people are now using Apple products such as an iPhone in China. Certainly the numbers are big, though the physical production of hardware may take place in China, the R & D efforts and the software are still produced in US and they are creating high demand for those engineers and professionals who do R & D and write software.
I can say for sure that Globalization and outsourcing is good for overall economic development and we at Global Sourcing Council are always looking to find the benefits and create best practices which will further enhance these benefits. I look forward for more discussions from our readers on this subject…□
Sanjay Sharma has over twenty years of Global experience in Information Technology, Supply Chain and Project Management. Sanjay has managed backend Sourcing and Procurement operations for large organizations in Europe, Far East & Australia. He led procurement operations for a large industrial goods manufacturing organization. Sanjay has articles published in business magazines and publications on the subjects of procurement, supply chain and project management. Sanjay speaks at Conferences, Seminars and Symposiums. He works as consultant for Project Management and Global Sourcing. In addition he teaches Project Management subjects. His email contact is firstname.lastname@example.org.