Wednesday, October 6, 2010
Bibliography
Anonymous. (2010, August 15). Indian businesses protest U.S. visa fee hike;
Outsourcing industry angered by change. Edmonton Journal, A.13. Retrieved
from http://www.edmontonjournal.com/business/Indian+businesses+protest+visa+hike/3401019/story.html on September 21, 2010.
Annotation: IT professionals in India are angry about a new U.S. law which is intended to strengthen security, but India sees it as a harmful thing as it costs them more money to send workers and resources to the U.S.
Kabler, P. (2010, August 31). Union tries to block IT job outsourcing. McClatchy - Tribune Business News. Retrieved from http://www.tmcnet.com/usubmit/2010/08/31/4982396.htm on September 30, 2010.
Annotation: Members of a state public employees union are protesting the government outsourcing IT jobs due to many legal issues. They believe it is fine for a private company to outsource jobs, but not the government, where you are “accountable to taxpayers”. According to one senator, outsourcing is a premature rumor, and one of many options
Lison, J. (2010, September 13). NTT Data seeks aggressive India ramp-up. McClatchy - Tribune Business News. Retrieved from http://www.tradingmarkets.com/news/stock-alert/itig_ntt-data-seeks-aggressive-india-ramp-up-1163556.html on September 21, 2010.
Annotation: NTT, a large IT corporation is looking to hire more employees in India. IBM currently has 100,000 employees in the country, and other IT companies like Accenture have many employees in India as well. NTT’s profit margin is lower than that of Accenture and IBM. More employees in India will help maximize and increase their profit margin. Annotation:
Lowe, K. (2002, March 4). The pros and cons of outsourcing. Retrieved from
http://www.entrepreneur.com/humanresources/hiring/article49616.html on October 4, 2010.
Annotation: Pros and cons of outsourcing, specifically relating to IT firms, is discussed. The author of the article owns an IT firm and outsources various parts of his company to India. There are both pros and cons, but the pros outweigh the cons when outsourcing is done right.
Outsourcing industry angered by change. Edmonton Journal, A.13. Retrieved
from http://www.edmontonjournal.com/business/Indian+businesses+protest+visa+hike/3401019/story.html on September 21, 2010.
Annotation: IT professionals in India are angry about a new U.S. law which is intended to strengthen security, but India sees it as a harmful thing as it costs them more money to send workers and resources to the U.S.
Kabler, P. (2010, August 31). Union tries to block IT job outsourcing. McClatchy - Tribune Business News. Retrieved from http://www.tmcnet.com/usubmit/2010/08/31/4982396.htm on September 30, 2010.
Annotation: Members of a state public employees union are protesting the government outsourcing IT jobs due to many legal issues. They believe it is fine for a private company to outsource jobs, but not the government, where you are “accountable to taxpayers”. According to one senator, outsourcing is a premature rumor, and one of many options
Lison, J. (2010, September 13). NTT Data seeks aggressive India ramp-up. McClatchy - Tribune Business News. Retrieved from http://www.tradingmarkets.com/news/stock-alert/itig_ntt-data-seeks-aggressive-india-ramp-up-1163556.html on September 21, 2010.
Annotation: NTT, a large IT corporation is looking to hire more employees in India. IBM currently has 100,000 employees in the country, and other IT companies like Accenture have many employees in India as well. NTT’s profit margin is lower than that of Accenture and IBM. More employees in India will help maximize and increase their profit margin. Annotation:
Lowe, K. (2002, March 4). The pros and cons of outsourcing. Retrieved from
http://www.entrepreneur.com/humanresources/hiring/article49616.html on October 4, 2010.
Annotation: Pros and cons of outsourcing, specifically relating to IT firms, is discussed. The author of the article owns an IT firm and outsources various parts of his company to India. There are both pros and cons, but the pros outweigh the cons when outsourcing is done right.
Conclusion
Outsourcing has been a practice used by companies for nearly 30 years now, but time is certainly still needed to perfect it. There are definite benefits to outsourcing, such as an increase in profit and a decrease in cost to create a product. The country in which a company outsources also benefits economically, as their unemployment rate decreases. There are also downsides when it comes to outsourcing, such as a higher unemployment rate and less oversight over employees. Both of the controversies discussed relate to the government, which shows that people believe outsourcing is much more acceptable in the private sector and businesses than in the government. The government is accountable to taxpayers, and should not outsource jobs for that reason alone.
Ultimately, without further research and time, it is impossible to tell whether the benefits of outsourcing outweigh the problems associated with it. While profits are increased for companies, helping the local economy, jobs are simultaneously taken away domestically, which hurts the local economy. There are countless variables that need to be accounted for before a definite assumption of whether outsourcing is good or bad can be made.
Ultimately, without further research and time, it is impossible to tell whether the benefits of outsourcing outweigh the problems associated with it. While profits are increased for companies, helping the local economy, jobs are simultaneously taken away domestically, which hurts the local economy. There are countless variables that need to be accounted for before a definite assumption of whether outsourcing is good or bad can be made.
Controversy and Problems
Outsourcing has many benefits, but as with everything else, there are problems. One main problem is that it is hard to oversee an employee across the globe (Lison, 2010). If you are a business owner, and you have an employee in the same building and same floor as you, it is very easy to see if they are being productive or slacking off. However, it is much more difficult to see whether an employee is being productive if they are in another country, or continent altogether. While it is now possible with technology to see how much work an employee does, it is ambiguous as to whether they are actually being as productive as they possibly can be.
Another problem with outsourcing, especially with the current unemployment rate, is that job possibilities for local workers decreases. Someone in the United States may be perfectly suited for an IT job, but if someone in another country that is equally qualified is willing to do the same job for a lower wage, they will likely be hired. This is because most employers care about profits more than anything else, and are likely to use whatever resources give them the greatest benefit. This causes a higher unemployment rate domestically, as more jobs are being given to people in other countries.
One recent controversy regarding outsourcing came when there were talks of West Virginia outsourcing government IT jobs. A state employees union is currently trying to block the government from sending 600 jobs to the private sector (Kabler, 2010). While the employees would not be in another country, like previous examples, outsourcing is simply contracting jobs to a third party. The controversy is mainly due to being associated with the government. The spokesman of the union, Gordon Simmons, said, “That's fine if you're a private business, but not if you're a government agency that's supposed to be accountable to the taxpayers” (Kabler, 2010). What Simmons is essentially saying is that when private companies outsource labor, the only people with welfare at stake are the companies employees, and customers. However, if the government was to outsource, everyone would essentially be affected, whether they wanted the government to outsource or not.
Another recent controversy relates to those who work for outsourcing industries in countries such as India. A new law, signed into effect August 13, 2010, will “nearly doubles fees on visas for skilled workers brought in by companies whose employees are more than 50-per-cent foreign” (Anonymous, 2010). This law strictly affects the IT industry, but it doesn’t affect workers who are employed at call centers It does however affect skilled workers who are sent to the United States to work on projects for U.S. clients (Anonymous, 2010). The reason for the controversy is that the fees only affect the IT sector. Som Mittal, the president of the National Association of Software and Services Companies (NASSCOM) believes that if the law applies to IT firms; it should apply to all firms (Anonymous, 2010). This however is not the case, and Indian businesses are reacting through protest.
Another problem with outsourcing, especially with the current unemployment rate, is that job possibilities for local workers decreases. Someone in the United States may be perfectly suited for an IT job, but if someone in another country that is equally qualified is willing to do the same job for a lower wage, they will likely be hired. This is because most employers care about profits more than anything else, and are likely to use whatever resources give them the greatest benefit. This causes a higher unemployment rate domestically, as more jobs are being given to people in other countries.
One recent controversy regarding outsourcing came when there were talks of West Virginia outsourcing government IT jobs. A state employees union is currently trying to block the government from sending 600 jobs to the private sector (Kabler, 2010). While the employees would not be in another country, like previous examples, outsourcing is simply contracting jobs to a third party. The controversy is mainly due to being associated with the government. The spokesman of the union, Gordon Simmons, said, “That's fine if you're a private business, but not if you're a government agency that's supposed to be accountable to the taxpayers” (Kabler, 2010). What Simmons is essentially saying is that when private companies outsource labor, the only people with welfare at stake are the companies employees, and customers. However, if the government was to outsource, everyone would essentially be affected, whether they wanted the government to outsource or not.
Another recent controversy relates to those who work for outsourcing industries in countries such as India. A new law, signed into effect August 13, 2010, will “nearly doubles fees on visas for skilled workers brought in by companies whose employees are more than 50-per-cent foreign” (Anonymous, 2010). This law strictly affects the IT industry, but it doesn’t affect workers who are employed at call centers It does however affect skilled workers who are sent to the United States to work on projects for U.S. clients (Anonymous, 2010). The reason for the controversy is that the fees only affect the IT sector. Som Mittal, the president of the National Association of Software and Services Companies (NASSCOM) believes that if the law applies to IT firms; it should apply to all firms (Anonymous, 2010). This however is not the case, and Indian businesses are reacting through protest.
Possiblities and Benefits
There are many benefits to outsourcing for IT companies. The main benefit, of course, is that outsourcing saves money. The reason this happens is labor in countries like India and China is much cheaper than it is locally in the United States. Knowing this, many IT firms outsource tasks such as computer support and maintenance, to a third party. Another big advantage of outsourcing is that an employer can tap into a new market of employees, and may find more qualified workers. Not only would the workers be more qualified or specialized compared to local employees, but also they would typically have a lower rate of pay than local employees. These two benefits are enough for many businesses to outsource jobs. One other benefit that is often overlooked is the fact that it is much easier to fire or let go an employee that is thousands of miles away. The relationship with employees across the world is much less personal, and therefore employees are more willing to fire unproductive or inefficient employees in India then someone in the same building as themselves.
IBM, as stated in the introduction, benefited greatly from outsourcing. The number of employees in India has grown more than 25,000 within the past three years, and shows no sign of stopping. Other companies have followed IBM, hoping to reap the same benefits that IBM saw. One company that is currently considering outsourcing more jobs is NTT Data Corp. Their objective is to become one of the top five IT firms in the world, and Takashi Enomoto said, “India is a very important part of our plan to achieve that” (Lison, 2010). NTT is currently ranked in the top 10 of IT firms. Currently, NTT has 34,000 employees, with 5,000 overseas, the majority of which are in China. In June 2010, NTT acquired the company Intelligroup, giving them 2,600 additional employees in India. Enomoto hopes that with these additional employees, they will grow to be a powerhouse in the industry like IBM.
This will certainly be no easy task, and take a great deal of time, especially considering NTT’s current net profit margin of 7%, compared to IBM’s 17% (Lison, 2010). However, outsourcing in India should certainly help them increase this profit margin, and grow in the IT market.
IBM, as stated in the introduction, benefited greatly from outsourcing. The number of employees in India has grown more than 25,000 within the past three years, and shows no sign of stopping. Other companies have followed IBM, hoping to reap the same benefits that IBM saw. One company that is currently considering outsourcing more jobs is NTT Data Corp. Their objective is to become one of the top five IT firms in the world, and Takashi Enomoto said, “India is a very important part of our plan to achieve that” (Lison, 2010). NTT is currently ranked in the top 10 of IT firms. Currently, NTT has 34,000 employees, with 5,000 overseas, the majority of which are in China. In June 2010, NTT acquired the company Intelligroup, giving them 2,600 additional employees in India. Enomoto hopes that with these additional employees, they will grow to be a powerhouse in the industry like IBM.
This will certainly be no easy task, and take a great deal of time, especially considering NTT’s current net profit margin of 7%, compared to IBM’s 17% (Lison, 2010). However, outsourcing in India should certainly help them increase this profit margin, and grow in the IT market.
Introduction
Outsourcing is when a company contracts work to a third party. While it has been in the news more recently, it is not a new phenomenon, and has actually been going on since the 1980s (Lowe, 2002). There has been much debate over recent years on whether outsourcing is the right decision for companies, or even on its ethicality. Many industries, such as textile and automotive, have began outsourcing work to countries like China, Taiwan, and India. The industry I will be focusing on is Information Technology.
Since outsourcing first went in to practice a few decades ago, technology was much different than it is today. Just as technology grew, the need for employees grew as well. IT Outsourcing in India is now a $50 billion a year industry (Anonymous, 2010). International Business Machines (IBM), the largest IT firm in the world today, began outsourcing in 1992 when they opened up in India (Lison, 2010). By 2007, the last year they took a “head count”, they had 73,000 in the country of India alone. Today, they are estimated to have 100,000 employees in India (Lison, 2010).
Outsourcing has clearly helped IBM, as it is now the largest IT firm in the world, and still growing. However, people still question the legitimacy of outsourcing’s benefits. Some people believe that outsourcing hurts the local economy, while others simply don’t know whether to trust an employee thousands of miles away. These problems, as well as benefits and possibilities of outsourcing, will be discussed throughout this paper.
Since outsourcing first went in to practice a few decades ago, technology was much different than it is today. Just as technology grew, the need for employees grew as well. IT Outsourcing in India is now a $50 billion a year industry (Anonymous, 2010). International Business Machines (IBM), the largest IT firm in the world today, began outsourcing in 1992 when they opened up in India (Lison, 2010). By 2007, the last year they took a “head count”, they had 73,000 in the country of India alone. Today, they are estimated to have 100,000 employees in India (Lison, 2010).
Outsourcing has clearly helped IBM, as it is now the largest IT firm in the world, and still growing. However, people still question the legitimacy of outsourcing’s benefits. Some people believe that outsourcing hurts the local economy, while others simply don’t know whether to trust an employee thousands of miles away. These problems, as well as benefits and possibilities of outsourcing, will be discussed throughout this paper.
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