When I first started business school and heard the term “offshoring” I assumed that a new business strategy was discovered. After reading this chapter, off shoring began as far back as 1992 MIT and Stanford University. The use of offshoring by organizations is growing, in fact it is possible to have 70% of all work offshored. I feel this is very beneficial to companies from a cost saving perspective, however the biggest question is what about the labor force of the U.S.?
Offshoring resulted in the loss of over 200,000 jobs in computer and mathematical fields with an overall loss of 560,000 jobs between 2001 and 2002 based on a study by the U.S. Bureau of Labor. This impacts the U.S. economy by lowering consumer spending due to a decrease in wages paid to employees. However, the trend of offshoring has cause the development of low cost marketing within foreign countries to provide IT services at 20% to 50% less than it cost in the U.S. Indian companies are in fact upgrading their systems to emulate IBM processes to offer better services for offshoring.
When I think of a business process being sent to another country, the question that is raised is how does the level of quality change? After reading through the chapter, it was mentioned that the quality was in some cases better offshored than here in the U.S.. Companies can actually save up to $ 300 million and receive good quality in comparison to having IT in the U.S. Aside from the potential loss in IT jobs, what are the risks of offshoring? I agree with the book that offshoring can result in sabotage because the U.S. is in a vulnerable where the U.S. governments no longer back them. There is also the over dependence of the domestic companies on foreign governments.
Based on the book the growth within the labor market is still rising and though jobs are being offshored, the jobs that are most affected are the IT jobs. With technology advancing I feel that offshoring will not be considered a trend but a way of doing business by domestic companies.
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ovides numerous benefits to companies, but its affects on the U.S. labor market worry me also. As you pointed out, Offshoring may cause a loss of 200,000 computer-related jobs. Reductions in IT investments and a lower demand for computer-related products will also take away these jobs. The 200,000 lost from offshoring combined with whatever amount lost from spending reductions is alarming. For IT employees, offshoring could cause their salaries and job security to decrease. On the other hand, the costs savings and associated financial benefits are tempting. A debate in another class on offshoring claimed that for every dollar of corporate spending that moves offshore, US companies save 58 cents. Also, I could see the job transition having a positive impact on U.S. exports. If say, IBM provides jobs in India, India will buy products from IBM in return. Anyways, I am still unsure on whether offshoring is a good thing for the IT industry, but I am definite that offshoring will continue so IT companies should embrace this trend in order to remain competitive in the flatter world of the future.
I guess it all boils down to what's more important, an organizations bottom line profit or the economy's impact of loss jobs. Eventhough this is an issue that is not research as deep as it should be, but eventually this is something that will soon have to be addressed. Offshoring will eventually have a domino affect reduced jobs, reducing the free flow of income, reducing the income put back into the economy and overall affecting the competitive market.
Offshoring have already happened in my country, Taiwan, for a long time. We have the same history as China and use the same language as theirs. International trade is the main business in my country. Many enterprise established their factory in China from 1980's until now. We also have big problems about labor and economy as the United States. However, we constrain form the policy of our government, so we cannot find a good way to solve this problem.
It's interesting to see that the concerns we face here in the U.S. about the effects of the labor market due to outsourcing, is faced by the countries we are outsourcing to. I think that eventually the U.S. will face constraints as well and will have the same problem of trying to solve the issue.
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