Offshore Outsourcing, Essay Example

Introduction

In the past decade the rate at which America has been offshore outsourcing for manufacturing and high technology jobs has been on the rise. Offshore sourcing refers to hiring of external organizations outside the regions where the goods or services are manufactured to perform certain business function (Mohammed, 2006). Some of the American manufacturing and high tech jobs that have been affected include computer programming, data processing, and technical support. Despite the fact the outsourcing of jobs reduces labor cost, operational cost and even improves productivity, offshore outsourcing is affecting America’s development both positively and negatively and hence the activity should be controlled by the federal government. While most of the offshore outsourcing of manufacturing and high tech jobs have affected the federal government negatively, others such as Google’s and software-as-a-service outsourcing have given the federal government high revenue and hence have proved that some outsourcing are good.

Audience: The audience in this paper is the America’s federal government. It’s the federal government’s responsibility to ensure only activities that contribute the state’s development are encouraged.

Purpose: This paper’s main purpose is to inform the federal government on the importance of controlling the outsourcing rather than discouraging since not all offshore outsourcing have negative impact on the state’s development.

Why offshore outsourcing is on the increase in America

Several reasons could be associated with the increased rate of offshore outsourcing of manufacturing and high tech jobs in America. These reasons include the significant wage difference between American and offshore countries. Most offshore countries that are hired for the manufacturing jobs have a relatively low wages compared to America. In addition, advancement in technology such as improved communication which makes it possible for telework to be done has also contributed to the increased outsourcing of high tech and manufacturing jobs. Most of the offshore outsourcing of jobs occurs with the institutions’ main objective being to cut down manufacturing and production costs.

States such as Bolivia and Brazil are enjoying the benefits of increased offshore outsourcing of manufacturing and high tech jobs by Americans. These countries are the leading in providing America with software and web programming, IT support, network solutions, game development and providing offshore outsourcing services. Offshore outsourcing of manufacturing and high tech jobs if not controlled will become potential threat especially in the American’s domestic job market. One of the reasons why offshore outsourcing of high tech and manufacturing jobs should be controlled in America is because this business strategy is compromising the long term competitive strategy of America (Mohammed, 2006). Offshore outsourcing will continue generating more powerful manufacturing and high tech companies in other countries who will ultimately pose a huge competitive challenge to America in the near future hence the reason why the federal government should consider controlling it.

Effects of offshore outsourcing to the federal government

According to financial reports, the offshore outsourcing phenomena have resulted to the disappearance of over 2.7 million manufacturing jobs in America (Daniel, 2004). Since most manufacturing and high tech companies considering the offshore outsourcing business strategy in order to lower the cost of production. These phenomena will not only increase the unemployment levels if not controlled in America but also will result to reduced wages. Offshore outsourcing of manufacturing and high technology jobs in America if not controlled will also increase competition in its innovative capacity. When doing offshore outsourcing for various jobs, high skilled professional in these sectors are also hired. Directly these creates loop holes in America’s innovative capacity and hence the states who are being outsourced can use this opportunity to use the innovation information they gain to improve their manufacturing and high tech sectors and bringing stiff competition in the market (Mohammed, 2006).

Offshore outsourcing of American manufacturing and high tech jobs is gradually shifting the American’s technology and talents to overseas and this in the long run will affect the state’s prosperity and growth. Offshore outsourcing of high tech and manufacturing jobs should be controlled since if not controlled will continue to threaten American’s knowledge based economy backbone (Vinaj et al, 2008). One of the reasons why America has been enjoying high market domination of both domestic and overseas market was due to its uncompetitive technological leadership. Uncompetitive technological leadership has been the key drive to development of high tech and other manufacturing jobs in America.  If offshore outsourcing is not controlled, it will drain away the knowledge based economy backbone and hence affect American’s economy and development strategy negatively.

Some of the states who have been using the offshore outsourcing especially for high tech jobs by America such as China have enhanced their technology leadership and pose great threat in affecting American’s economic prosperity. Controlling offshore outsourcing will help America in dealing with the fierce global competition and hence prevent America from weakening its economy further. Controlled offshore outsourcing will continue to benefit American’s shareholders and customers through low cost products while at the same time ensuring America’s innovativeness dominance is not shifted to other overseas states.

Offshore outsourcing can be associated with the increased deployment strategy witnessed in high tech and manufacturing jobs. Most of the American employees are deployed to other states after offshore outsourcing. This is an indirect form of brain drain and if not controlled will have adverse effects on the American’s economy and technology advancement. Most of the manufacturing and high tech jobs that America outsources offshore are from the services sector. Service sector is one of the sectors that create massive employment in America, accounting for 83% of US employment (Lou, 2004). If this sector is affected, the American’s GDP will be also affected hence the reason why offshore outsourcing should be controlled.

However, offshore outsourcing should not be abolished completely since it still plays an important role in maintaining the American’s perspective of moving towards service based economy. If well controlled, offshore outsourcing especially for service oriented companies will play an important role in generating global revenues and hence have a positive impact on American’s economy. Companies offering computing and software-as-a-service services should be encouraged to expand their outsourcing strategies in order to accelerate the revenue generation. Companies with such services should be encouraged to continue outsourcing by the federal government developing varying taxing breaks for companies that outsource and those which do not especially those whose outsourcing is considered to be good.

Conclusion

Offshore outsourcing for American manufacturing and high technology jobs has been on the rise since late 1990’s. There are several factors that have been influencing offshore outsourcing by American companies for manufacturing and high tech jobs such as pressures to reduce administrative, operational and labor costs. Despite the fact that some outsourcing such as in the Google and other American based software-as-a- service can be considered to be good, its very essential that the offshore outsourcing process is well monitored and controlled in order to avoid long term effects.

The rate at which offshore outsourcing of American’s manufacturing and high tech jobs has been increasing if not controlled may have a negative long term effect on the American’s economy. Some of the reasons that make it necessary for offshore outsourcing of American manufacturing and high technology jobs to be controlled will be in order to maintain the American’s knowledge and innovative based economy. In addition controlling the offshore outsourcing will help Americans deal with unemployment which offshore outsourcing is accelerating.

Controlling the offshore outsourcing of American manufacturing and high tech jobs by the federal government will ensure America remains well placed for global competition. Some of the strategies that can be used in controlling offshore outsourcing include introduction of home shoring and telecommunication which will too enable most companies overcome some of the pressures such as cutting cost that has been pushing companies to offshore outsourcing of manufacturing and high technology jobs.

References

Daniel, H. (2004). Da“Occupational Employment Projections to 2012”, Monthly Labour Review.

Lou, D. (2004). Exporting America: Why Corporate Greed is Shipping American Jobs Overseas. New York: Warner Books publishers.

Mohammed, H. A. Tafti. (2006). Risks factors associated with offshore IT outsourcing. Emerald group Publishing limited. Retrieved from www.emeraldinsight.com/0263-5577.htm

Vinaj, C. et al. (2008). Offshoring 2.0: Contracting Knowledge and Innovation to Expand Global Capabilities.  ODuke University and Booz & Co. retrieved from https://offshoring.fuqua.duke.edu/pdfs/DukeServiceProviderReport_web.pdf