Outsourcing has been one of the greatest boons to the modern economy. With rising costs, outsourcing has been a key alternative that all businesses – big and small – have adopted to streamline their processes and optimize their businesses. Outsourcing has not only helped the businesses, it has also created new jobs and improved the economy. This was fine as long as all the outsourcing was done within the same country. With the advancement in technology, there have been high speed reliable links established that have meant that countries have become better integrated than ever before. This added another dimension to outsourcing – off shoring. Jobs are being done by skilled workers in developing nations at lower rates. This has created a lot of hue and cry in developed nations like Europe and the US. This has resulted in several social beliefs about off shoring and causing governments to look at it adversely. Given below are some common myths and the related facts.
The most evident conclusion that one can make from the off shoring concept is that jobs in advanced markets are being shipped to developing markets causing the rising unemployment. While it is true that people are losing jobs, it is not true that off shoring is the primary cause for rising unemployment. A failing economy and other factors have had greater impact on unemployment. Estimates show that by 2012 barely 2% of all jobs in US would be outsourced to other countries. Besides, statistics also show that off shoring accounts only around 1% of total jobs lost in the US. Thus, it is evident that off-shoring with all its job transfers does not impact the unemployment rates significantly.
Another perception is that the free market economy is causing companies to recruit talent from developing nations are much cheaper rates which is affecting the competitiveness of the local talent. This is causing many operations to be shifted outside the country and that is causing job loss. While jobs are lost in this fashion, it is not true that this is actually affecting the unemployment rates drastically. Besides, low cost of production implies lower prices of goods and services imported from those nations. The larger picture is the savings that the economy makes by using these low cost solutions. Besides, a strong currency in the developed nations is affecting the exports more than cheap labor in developing nations. A free market economy fosters free trade which is important for any economy. Every economy in the history of the world has only benefited from increased trade. Curtailing the free trade for a small number of outsource jobs could have far serious effects on the economy in general.
The third common myth is that all jobs are migrating from developed nations to the developing nations alone. This is again not true. Outsourcing is a highly competitive market and to gain customer confidence, the companies need to have presence close to the customer. This requires all outsourcing firms to set up offices closer to the client sites and employ personnel. This actually leads to growth in high quality jobs for the local people. Thus, outsourcing is not eroding jobs; it is in fact improving the quality of jobs within the developed nations. Statistics show that number of inshore contracts won has been significantly higher than offshore contracts. This is again a clear indication that outsourcing is helping the economy more than harming it.
Lastly, one must realize that costs are not the sole reason why companies look at outsourcing. While off-shoring does have cost benefits, it also has the advantage of employees working throughout the day. With properly selected centers, organizations can ensure that they have production, development or even service delivery operations running on a 24 x 7 basis which is important in today’s highly competitive world. Having such operations allows private multi-national companies deliver more efficient and effective service than the local companies or even the state. All this accrues as benefit for the business.
In conclusion, while off-shoring is taking away a fraction of the jobs from the developed economies, it is actually improving the quality of jobs locally, reducing cost of goods and services for the local consumers and delivering high quality services through the organizations.