Outsourcing
[10] Outsourcing includes both foreign and domestic contracting, [11] and therefore should not be confused with offshoring which is relocating a business process to another country but does not imply or preclude another company.
[12] In practice, the concepts can be intertwined, i.e. offshore outsourcing, and can be individually or jointly, partially or completely reversed,[13] as described by terms such as reshoring, inshoring, and insourcing.
Drucker began explaining the concept of "outsourcing" as early as 1989 in his Wall Street Journal article entitled "Sell the Mailroom".
[23] The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider's knowledge and economies of scale to improve performance and achieve the service needed.
[24] In 2009, by way of recognition, Peter Drucker posthumously received a significant honor when he was inducted into the Outsourcing Hall of Fame for his outstanding work in the field.
[43] Forbes considered the 2016 U.S. presidential election "the most disruptive change agent for the outsourcing industry",[44] especially the renewed "invest in America" goal highlighted in campaigning, but the magazine tepidly reversed direction in 2019 as to the outcome for employment.
[50] Inflation, high domestic interest rates, and economic growth pushed India's IT salaries 10–15%, making some jobs relatively "too" expensive, compared to other offshoring destinations.
[51] Closer to the U.S., Costa Rica has become a major source for the advantages of a highly educated labor force, a large bilingual population, stable democratic government, and similar time zones as the U.S.
[78] In the area of call-center outsourcing, especially when combined with offshoring,[79] agents may speak with different linguistic features such as accents, word use and phraseology, which may impede comprehension.
Emerging thinking regarding strategic outsourcing is focusing on creating a contract structure in which the parties have a vested interest in managing what are often highly complex business arrangements in a more collaborative, aligned, flexible, and credible way.
"[100] A clue to a tipping point having been reached was a short essay titled "Maybe You Shouldn't Outsource Everything After All"[101] and the longer "That Job Sent to India May Now Go to Indiana."
New factories often: Public opinion in the U.S. and other Western powers opposing outsourcing was particularly strengthened by the drastic increase in unemployment as a result of the 2007–2008 financial crisis.
[104] Deloitte's survey identified three trends: Insourcing is the process of reversing an outsourcing, possibly using help from those not currently part of the in-house staff.
This competitive strategy applies the classical argument of Adam Smith, which posits that two nations would benefit more from one another by trading the goods that they are more proficient at manufacturing.
The New York Times disagreed, and wrote that free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.
[118] The impact of offshore outsourcing, according to two estimates published by The Economist, showed unequal effect during the period studied 2004 to 2015, ranging from 150,000 to as high as 300,000 jobs lost per year.
[120] More than 90% of the jobs that American companies "offshored" and outsourced manufacturing to low cost countries such as China, Malaysia and Vietnam did not return.
[128] From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and is reflective of the general process of globalization and economic polarization.
[134] Obama met with representatives of Otis Elevator, Apple, DuPont, Master Lock, and others which had recently brought jobs back or made significant investments in the U.S.
[140] By contrast, higher rates of saving and investment in Asian countries, along with rising levels of education, studies suggest, fueled the 'Asian miracle' rather than improvements in productivity and industrial efficiency.
Similarly, since the signing of the North American Free Trade Agreement, heavy industries have increasingly moved to the U.S., which has a comparative advantage due to its abundant presence of capital and well-developed technology.
Although outsourcing can influence environmental de-regulatory trends, the added cost of preventing pollution does not majorly determine trade flows or industrialization.
Maximizing the economic value of an offshore software development asset critically depends on understanding how best to use the available forms of legal regulations to protect intellectual rights.
[160] In turn, companies such as Pfizer and Novartis, have lost rights to sell many of their cancer medications in India because of lack of IP protection.
"[47] According to other sources, the "Do what you do best and outsource the rest"[21] approach means that "integration with retained systems"[47] is the new transition challenge; people training still exists, but is merely an "also."
The U.S. has a special visa, the H-1B, which enables American companies to temporarily (up to three years, or by extension, six) hire foreign workers to supplement their employees or replace those holding existing positions.
[179] The motivation for this has been: While much of this work is the "bread and butter" of specialized departments within advertising agencies, sometimes specialist are used, such as when The Guardian outsourced most of its marketing design in May 2010.
Although BPO began as a cost-reducer, changes (specifically the move to more service-based rather than product-based contracts), companies now choose to outsource their back-office increasingly for time flexibility and direct quality control.
[195] Unclear contractual issues are not the only risks; there's also changing requirements and unforeseen charges, failure to meet service levels, and a dependence on the BPO which reduces flexibility.
On the other hand, an academic study by the London School of Economics was at pains to counter the so-called 'myth' that RPA will bring back many jobs from offshore.
