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The Advantages Of IT Outsourcing
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The Advantages Of IT Outsourcing

Outsourcing non-core jobs to foreign companies has become such a huge business that many companies in the US simply cannot survive without it. With the multi-billion dollar software industry becoming more crowded and competitive by the day, the only way these companies can hope to make any profit is by IT outsourcing. Thus, a large number of companies in the US outsource everything from data entry to customer service to companies in developing countries like India, China, Vietnam and the Philippines.

While there is no doubt that the internet played a central role in the phenomenal growth of outsourcing, the main driving force was, in fact, economy. As rising labor cost made huge dents into the profit margins of companies in the developed countries, they began to look for ways to cut the overhead. This was provided by half as costly but equally productive workforce in the developing countries whose government were only too happy to welcome any kind of inflow of foreign capital. Thus began another 'gold rush', this time eastwards, that put billions of dollars into the coffers of US companies. And leading the pack were IT companies like Microsoft and Sun Microsystems.

Many people mistakenly take outsourcing to mean the same as off-shoring. These two are conceptually very different. The former involves contracting out a business function or a process to a company or worker based in a foreign company, while the latter means relocating a function or process of the company to another country. So when a software company in the US contracts out a component of its software to a software company in China, it is outsourcing. But when a US car maker opens a branch in China to manufacture a certain part of the car, it is offshoring.

IT outsourcing is hugely beneficial to US companies because it cuts the labor cost by almost 50%. Not only that, it also helps them save huge amounts of money on social security, Medicare, safety protection, taxes and training. Contract workers in foreign countries neither expect nor demand any of these facilities. And the companies are also not obligated to provide any of these facilities. Training employees or possible employees to handle new functions or process is also has as costly as in the USA.

Despite the blame IT outsourcing has received because of loss of jobs in the US, it actually benefits the country in several ways. Companies that outsource their functions and processes provide their products and services to domestic customers at a cheaper price than those that do not. Cheaper prices allow customers to buy more products and services which helps the country's economy. Outsourcing allows to companies to have a larger profit margin, which goes into the bank accounts of he company's workers and shareholders, a part of which ultimately goes to the federal government in the form of taxes.


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