The definition of outsourcing means the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). More recently, the term has taken on negative political connotations and it has come to mean the elimination of native staff to staff overseas, where salaries are markedly lower.

In general, the term means, in popular parlance, the outflow of high-paying, good jobs to low-paying areas of the world. The idea is that good jobs are being exported overseas by greedy corporations that are motivated by nothing more than profit. In reality the original definition is more accurate: subcontracting jobs to reduce costs.


A more technical definition would be that the process of outsourcing is done to decrease unit costs. Another, technical definition would be the purchase of off-shore, arms-lengths services. Arms-length means buyer and seller are in different firms in different geographical regions or countries. Outsourcing is not foreign direct investment, nor is it the purchase of cheaper manufactured parts from off-shore. Outsourcing only involves services in different firms and in different countries.


The advantages of outsourcing are numerous. First, there is the obvious advantage that there will be a reduction in costs associated with a product. A reduced cost will mean lower prices. When work is outsourced it allows for work on more core aspects of a company, in other words it frees up the non-outsourced employees to work on the matters of the business that are most important. Further outsourcing allows/provides flexibility in staffing which can be a cost cutting measure. Another advantage is that along with outsourcing is “insourcing”.



This means that while there will be an outflow of direct jobs there will also be an inflow of indirect jobs. Jagdish Bhagwati, the British economist, found for example the case of Info Management Consultants based in Reston Virginia that for every Indian engineer hired by the firm there were 6 domestic engineers hired.


Because the US is such a large exporter of arms-length services this could be a great prospect if there is even a one-for-one correlation to outsourcing. Bhagwati further points out that there is a total of 30 million jobs lost and created every year in the United States, and that 300,000 are lost annually to outsourcing. This is neither advantage or disadvantage but a way of putting it into perspective.



Another big advantage, yet not readily identified in the media, is innovation and the product cycle theory which points out that as technologies become mature they move to the less developed nations where they are cheaper to produce. There is the example of electronic production moving from Japan to Korea, and now to southeast Asia. The same is true for more heavy manufacturing like car manufacturing.


The Japanese are now outsourcing the production of cars here in the US as well as Mexico, southeast Asia etc. The idea is that these types of jobs are moving overseas while better, cleaner jobs based on services are replacing them. There is a distinct advantage to not having to work in the monotony of a factory, not to mention the risks associated with manual labor.


Another example of the advantages of outsourcing has been in the decrease of information technology, particularly software and services, may actually increase productivity in the US. Katherine Mann identified a 10-30% decrease in prices of information technology from 1995-2003 and that increased US GDP by approximately .3% per year.



There are also disadvantages to outsourcing. The main proponent of protection against outsourcing is Paul Samuelson who thinks that the growth of technology in the developing world as creates outsourcing which Samuelson says may reduce the welfare of industrialized nations. The idea is that, in the Ricardian perspective, that countries like China can create a comparative advantage, especially in technology, that will mean that there will be no advantage of trade for countries like the US because China will be able to provide the product below any conceivable autarky price that the US can manage.



A disadvantage of outsourcing is the possibility that information sent overseas can be held hostage for more money. This recently happened with US medical information held by a Pakistani worker who wanted more money, or she would release this sensitive and private information. The point here is that there is very little ability to oversee the work or to ensure that it is not falling into the wrong hands.



A final disadvantage is that once you have outsourced the work it may be contractually hard to retrieve that work back. Studies have shown that as many as 30-35% of all service contracts are not renewed. This seems to indicate that much of outsourcing is not satisfying the needs of the outsourcer, or that other problems have been encountered with the outsourcee.

Hey Jimmy thanks for copying your second year college textbook. It was a good review.

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BLIND FAITH IN BAD LEADERSHIP IS NOT PATRIOTISM

Uhh, it is not a copy, it is something I wrote about a year ago.

But you could just admit that you don't have any refutations, I would understand.

No really i liked your post it really did sound like a text but if say you wrote it i will take your word for it. Your last several posts have been wierd. i liked this one.

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BLIND FAITH IN BAD LEADERSHIP IS NOT PATRIOTISM

Well again, you are gracious. Thank you!!!

outsourcing is outsourcing i should know. i work for chrysler and we get all sorts of crap from other countries. now just cause they will claim its 1 for 1 or whatever doesnt mean the jobs replaced pay the same amount. guys i worked with have lost their jobs due to outsourcing and now they work for someone making half of what they used to. as for bringing the cost down, thats a lie, for all the parts of a car that are made in some other country where the worker is paid 5 dollars a day due you see the price of cars going down? no they continue to go up as the parts get cheaper and cheaper and believe me cheaper made. so you go ahead and say its all for nothing but your job whatever it is will be on the chopping block sooner or later.

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There is outsourcing and offshoring.


That is not outsourcing. Read the article for a light definition.




.

Do you know that YOUR industry caused the loss of hundreds of thousands of jobs?

Yes!...carriage makers, horse breeders, blacksmiths, horse hotels, &c.

Shame on you and your hurtful greed.


Hooey. They could move down to Arkansas because lots of car manufacturing is going on down there.

And alot of the problem facing US auto manufacturers is the fault of those crappy unions. Outrageous union benes add approximately $2500 dollars to the sticker price.

Car manufacturers ANYWHERE in the world ARE NOT paying their workers $5/hour.!!!!!

If you could demonstrate that I would love to see it.

But you can't.



Really I will tell you something. I bought a Honda Del Sol in 93 and that car only ever needed new tires. I put 145,000 miles on it when I traded it in for my Infiniti M45 in 03 and got $4200 for it!!!!

I bought a 1998 Camaro SS in 1998 and have had sooooo many problems that I won't detail them.

A couple of months back I asked a buddy of mine to estimate the trade-in value, and it came out to $6000. Now the car is newer, and it only has 59,000 miles on it.

AND it has tons of extras: a supercharger, a racing suspension, body extras, a great post-manu stereo system and other things.

I know that a trade-in is never going to be as good as selling on the market, but the fact remains that its trade in value is only $1800 more than the Honda which had 2 and 1/2 as many miles on it.


finally, not one American car got high marks this past year from that car rating agency (can't remember if it was Forbes, Consumer Reports, something like that.)

Liberals can't even define outsourcing yet they are monumentally afraid of it.


the sky is falling the sky is falling.

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PROUDLY REVILED BY THE LOONY LEFT SINCE 1999!!!!

"I done told you once you son a bitch I am the best that has ever been."

you liberals make me sick to my stomach.

I am so smart.

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PROUDLY REVILED BY THE LOONY LEFT SINCE 1999!!!!

"I done told you once you son a bitch I am the best that has ever been."

you liberals make me sick to my stomach.

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People should not be afraid of their governments. Governments should be afraid of their people.
http://www.youtube.com/watch?v=vp92vkXcC0w