Question

Outsourcing of American jobs became a significant topic during the past election. What might be some advantages and disadvantages from sourcing IT or engineering work to remote sites in the Pacific Rim or south Asia?

Answer 1

The main advantage of outsourcing the American jobs to remote sites in the Pacific Rim or south Asia is cost cutting. The labor costs in these areas are lower while comparing with the American labor rates. There are other costs also involved in American jobs which include unemployment tax, social security taxes, worker’s compensation etc that increases the employer’s financial burden. But most of the countries in the Pacific Rim or south Asia do not have these taxes and the employer can cut down these costs through outsourcing. Another advantage is the availability of large pool of technical resources available in these countries which would help the US employers to continue their operations without facing any scarcity of resources. Outsourcing also helps the companies to focus on core business processes in the organization. Outsourcing of the service based operations would help the company to focus on innovation and other activities that would bring more revenue for the firm.

The main disadvantage of outsourcing is the limited communication which makes it difficult to control the outsourced operations. Another disadvantage is the risk of quality work as there are many barriers including language, culture and supply chain barriers which may affect the quality of work. Another disadvantage is the hidden costs like travel, training and infrastructure expenses that may reduce the cost benefits of outsourcing. The salary of the workers in most of the countries including India is increasing with the demand for skills and the cost advantage may become insignificant while comparing to hiring domestic employees. The reputation in US also may get affected in US when the companies outsource the jobs to foreigners instead of US citizens. The chances of jeopardizing sensitive information is another disadvantage as the company needs to share certain confidential information while outsourcing.