Is offshoring and outsourcing good practice for United States businesses?
Debate Paper
Maria Remy, Tyson Swan, Tresheena Robinson, Lisa Peterson, Heidi Martinez
BCOM275
October 28, 2013
Prof. Kathyrn Lea
Is offshoring and outsourcing good practice for United States businesses?
This debate paper will examine the practice of offshoring and outsourcing of businesses in the United States. Offshoring is when a corporation moves their business procedures, such as production or development, to an overseas location that will have lower business costs. Outsourcing is when a corporation hires another overseas company to handle their business functions.
In this paper we will discuss the positive aspects of offshore outsourcing, such as companies being more competitive, improved productivity and reduced costs. We will discuss the negative sides, which consist of poor quality work, poor customer service as well as the loss of jobs for many people in the United States.
This paper will look at the ethical and legal implications. The ethical implications regarding costs, employee maltreatment, and the various methods used to attract US businesses, loss of domestic jobs, and exploitation of foreign workers. The legal implications will deal with the mixed legal system, no Federal laws regulating outsourcing, and the proposed legislation.
The intention behind this paper is to inform you of the different sides to this argument, and for you to make a thought out conclusion as to whether or not you agree with overseas outsourcing.
Positive Aspect of Offshoring and Outsourcing
Outsourcing and offshoring are good business practices for companies in the United States. Companies of the United States are more competitive because of outsourcing and offshoring, according to the Encyclopedia of Career Development: Outsourcing and Offshoring published in 2006, “Current estimates indicate that 80 percent and perhaps 90 percent of larger companies outsource at least part of their businesses” (Logan, 2006, p. 2). Businesses’ offshoring their activities inaugurate to markets abroad. Offshoring provides an inlet for companies looking to increase their global economy. Dick Muldoon, spokesman for Lucent Technologies, gave the following reason for offshoring, “Moving offshore in one way produces cost savings. But that’s not the only reason. We are a global company and it helps to have operations located where we do business” (Prezas, Simonyan & Vasudevan, 2010, p. 181 ). A global company needs to have employees who understand the language and culture of the countries that they are entering. The safety of the world and the improved education systems in countries like India and China has increased offshoring of white-collar jobs. Foresster Research projected in 2004 that by 2015, 3.4 billion of the United States office-based jobs will go offshore (Logan, 2006).
Decades ago companies attempted to become big conglomerates, but profits began to fall so they needed to get back to their “core” purpose (Reh, 2013). Outsourcing and offshoring office-based jobs like accounting, information technology, and software development helps companies concentrate on profitability. These practices also benefit the United States companies by increasing employee productivity. Employee productivity is increased when the company can focus on “core” products or activities because the other parts of the business are outsourced. Strategies for management to decide on outsourcing include resource-based view (RBV) and transaction cost economics (TCE). Resource-based view means that the companies focus on the resources that they do uniquely well (Logan, 2006). “This contributes to the higher average productivity of the domestic economy, raises income, and benefits the consumers, who can enjoy lower-cost, reimported goods and services,” stated in the Encyclopedia of Governance: Offshoring (Charnock, 2007, p. 2). Countries that have benefited from the practice of offshoring