07 Oct Outsourcing in Global Economy
Outsourcing is a subject that has changed the world global economic phenomenon. The subject has attracted the attention of all the multinational companies, enterprises and startups. The advantages of outsourcing are numerous and in the same way, it also generates some controversy whenever it’s discussed in a public arena; something that is unlikely to change, no matter how convincing the arguments are. However, while the delicate nature of outsourcing always provokes controversy among business executives and carry negative connotations, there are actually numerous benefits to the global economy which cannot be ignored. Outsourcing is a concept that is better addressed in terms of benefits to the local economy and the foreign economy and it has shown a significant impact on countries like India, Philippines, and Bangladesh.
Outsourcing is a pretty simple and straightforward concept to understand and how it is helping in booming the global economic sector that is our concern. Multiple business activities in companies that are dematerialized in nature and cannot be performed efficiently are passed on to economies with low-rate labor market; say third world countries. Operations such as receiving query calls from consumers, human resource recruitment, managing healthcare records, and accounting services, etc., are some of the normal functions that have been contracted out to third-party providers for their completion.
The concept of outsourcing in business organizations is quite old now. The idea of outsourcing can be traced back to the 1880s when the first New England textile mills moved its production to the Carolinas. At that time, it might have not carried the name ‘outsourcing’ but the companies started giving business contracts to third party vendors. Since then, different industries are implementing the process of outsourcing to handle their business operations
For the past decade or so, outsourcing has created a vast market for itself at a global level. Speaking generally, the concept of Outsourcing has been warmly welcomed by all over the world but for third world countries, it is like the cherry on the cake since these countries are mostly they are at the receiving end of this process. With outsourcing, the unemployment rate in third world countries have been greatly reduced and so the poverty is. More manpower is now engaged in specific industries business activities for big companies and organizations. In this way, they are earning a handsome revenue and bringing it to their country hence overall increasing the economy of the country.
Effects on Economy of Developing Nations
Realistically speaking, Asian third world countries like the Philippines, India, and China are getting the more benefits of outsourcing.n developed countries like the US, UK, and Austrailia contact these third world countries for some requirements, this, in turn, adds to their country’s economy. We all know third world countries have the highest unemployed rate, but when opportunities are provided to them in different industries, they earn revenue and help to stabilize their country’s economy to a decent level. For instance, millions of opportunities are provided to the labor of the Philippines, India, and China. American companies contact India and China for IT services because the skills are similar while the wages are much lower.
The BPO industry experts believe that Information Technology BPO services were started first in India. It was around three decades ago when the US and the British companies hired Indian employees for their business activities. It makes India a pioneer of IT- BPO services. With time, Pakistan became an offshore destination for some business operations and in the late 1990s, India was getting the contracts from big entities like American and England companies. We can say that Pakistan started providing BPO services when India had already made a position in the outsourcing market.
With years passing by, India boosted its IT sector greatly, established its global ranking in the field of IT outsourcing services like call centers, manufacturing, retail, insurance, finance and accounting, human resource and other particular business processes. In the past 20 years, many call centers have been outsourced to India, Pakistan, and the Philippines. That’s because the workers there speak English and cheap labor market.
Outsourcing in Pakistan
Although Pakistan entered quite late in the field of outsourcing still it is earning a decent revenue and contribute to the overall economy of the country. Why outsourcing in Pakistan? Mostly the big enterprises and organizations contact China, India, Philippines, and a number of other places. Unarguably they are great destinations for outsourcing but the countries that do not have sufficient budget to hire the employees they move to other destinations which have comparatively cheaper labor. Pakistan is one such country which offers skilled professionals in low budget. In the field of outsourcing, Pakistan is now emerging and turning into success stories. What makes Pakistan a good outsourcing nation is it is the sixth most populous country in the world blessed with great talent and resources. The government of Pakistan is working towards providing better facilities and services to its people.
Many big Companies, local or international, are now outsourcing their business activities to Pakistan including marketing, call center, retail, accounting, and human resource management. For instance, Unilever, a multinational brand is now outsourcing most of its business activities in Pakistan. The multinational brand has given the responsibility of marketing various ‘Ponds’ products to an external firm in Pakistan. This not only made Pakistan stand in the list of successful outsourced nations but also helping to improve the economy. In the same way,
Effects on Economy of Progressive Countries
Some economists have made predictions that by 2015, more US jobs will be outsourced to developing Asian and African economies. And the reason is these countries offer cheaper labor and skilled workforce. This is on one will benefit the Asian and African countries but there is a dark side as well. The US and other developed countries that are deep into outsourcing, is that more local workers will be stripped off with the opportunity for employment as most functions would eventually be transferred to offshore outsourcing countries. This is not a good sign for the economy of these countries who prefer outsourcing.
Similarly, outsourcing is now seen as a potential cause of long-term unemployment in the US, firing own labor force and hollowing out most industries. According to Surveys and studies made by many researchers have mentioned that outsourcing of jobs or services by US companies in developing countries in Asia and Africa as one of the causes of economic decline in the US. However, President Trump is focussing his campaign on ending outsourcing to become the greatest job-producing president in U.S. history. He has also promised to pressure China to reduce its subsidies and raise its currency value to bring outsourced work back in the US.
During the 2016 presidential campaign, Donald Trump promised to bring back jobs in America. To do this, he would talk to NAFTA. He said in order to bring work back in the US, he would be imposing tax and duties on imports from China and other nations. This, in turn, increases the prices of those goods and services made in those countries. This ultimately brings back the work in the US, providing work to its own employees and improving the economy.
The outsourcing debate is a never-ending debate. There are some people that argue in its favor while others argue against it. But there is one last issue that can be positively tackled and addressed with outsourcing is that the process is bridging the gap between the world’s richest countries and the world’s poorest nations. Through globalization and bridging the gap between developed and third world countries, we are taking world towards international peace, security, and prosperity.