We should understand the evolution of the concept of globalization to appreciate the concept of outsourcing. During the last century developed countries prided on their economic growth, prosperity and technological advancement. The costs of production or services did not so much matter. Wages were not perceived as significant factor in the industry. The trend was a flourishing domestic economy, employment and exemplary export growth. Ironically the very efforts of globalization and technology integration have brought in their wake, cost comparison and labor cost efficiency leading to outsourcing as a preferred option by the turn of the century. Now there is a raging debate on how to optimize outsourcing if not curb it.

Outsourcing and globalilization

It is a mistake to view outsourcing as the Achilles heel of only the US. No doubt, being in the leadership position as a provider of goods and services in a free market environment for so long, it has come to be affected the most by offshore outsourcing. With technology especially the information technology making rapid strides with each passing year and the world being christened as “Global Village”, production of goods and services are migrating to optimization pastures. Industries and corporations cannot be blamed for such a phenomenon. Afterall they are in the business of optimizing costs and fattening profits. Otherwise they cannot survive. Social responsibilities in terms of native country’s interests and native work force cannot superimpose themselves in a business context.

With the strong emergence of Internet technology and trained manpower availability in other countries, companies in developed countries are off loading a lot of processes to other countries. To add to the technology factors, liberalization of economies around the world especially China, India, Russia, and other Asian and Latin American countries has meant those countries attracting more foreign investments. This in turn becomes an attractive investment proposition to Multi National Corporations and divests proportionate capital from native countries. This translates to migration of jobs as well.

Domestic industries versus foreign competition

In almost all developing countries where there is cheaper availability of labor, the companies that can compete for outsourcing jobs are very few indeed. So there is a limit to possible exploitation by foreign companies. It is also of course true that native skills are in short supply not withstanding the wage disparity. The debate then is so much on foreign versus domestic competition but on core competencies and optimal manipulation of them. Gregory Mankiw, the head of President George W. Bush's Council of Economic Advisers observed that "outsourcing is just a new way of doing international trade," which makes it "a good thing."

The common charge is that the information revolution has propelled the decimation of U.S. manufacturing and facilitated the outsourcing of service-sector jobs. Backroom call centers are being transformed into high-level software programming packages. Critics advocate that offshore outsourcing deserves attention and that some measures to assist affected workers are called for. But is such alarmist approach going to do any good to the American workers in the long run? Should Americans be concerned about the economic effects of outsourcing? The answer is not entirely simple. Available and reliable data suggests that gross job losses due to offshore outsourcing have been minimal when compared to the size of the entire U.S. economy. The outsourcing phenomenon has shown that globalization can affect white-collar professions more, so far immune to foreign competition, in the same way that it has affected manufacturing jobs for years..

Future Prospects

Future prospects are a function of the present practices. Outsourcing occurs when a firm subcontracts a business function to an outside supplier. This practice has been common within the U.S. economy. The reduction of communication costs and the standardization of software packages have now made it possible to outsource business functions such as customer service, telemarketing, and document and data management. Other affected professions include medical transcription, tax preparation, banking operations and financial services. All this is a result of technological advancement and availability of trained manpower and a climate of free flow of global trade. It cannot be reversed as a corrective measure by any one economy. On the other hand generation of more capital through outsourcing shall certainly lead to more economic activity, more diversified business activity and better prospects for the native work force as well. Cheaper labor else where has to be countered not by reducing wages but upgrading skills and utililising the costly labor for matching jobs. So as long as business is sustained and profits accrue prospects will multiply. No ground for despair.