The term “outsourcing” gained widespread acceptance during the turn of the 21st century when the control of public services was turned over the companies for economic reasons Private companies were hiring employees on a contractual basis to save money on benefits that are paid to regular employees. Labor outsourcing is domestic and foreign contracting and sometimes includes shifting the entire business with machinery and equipment to another country. Monetary gains or savings from lower labor rates is the biggest economic motivation for off-shoring.
Outsourcing saves a lot of money because companies only pay for the services they need when they need them. It offers greater budget flexibility and management because the organization does not need to employ and train expert or technical and management staff, reducing capital and working expenses.
The most common areas where outsourcing does very well are making websites and marketing services or analysis where communication via the Internet does not require a physical presence within company premises and can be done anywhere in the world. All the work is completed and delivered digitally to the company.
Because of intense competition among developing countries, companies obtain a fraction of the rates they would pay if the same services were performed in their countries.
Labor Outsourcing
Labor outsourcing also works very successfully, where different contractors are employed to carry out different phases of the work before the product is packaged for delivery to consumers.
Although most people view outsourcing as the loss of jobs in the countries where companies outsource, with the money saved, companies grow stronger, generating and stimulating further trading activities. Increased trade activity means more jobs for everyone, including the home country.
Outsourcing is not a one way street, benefits flow both ways. Most developed countries give economic aid to poor countries which fails because of the inherent corruption in these countries and because these countries are underdeveloped and will remain poor.
Economic Globalization
Outsourcing and establishing businesses is much better to help poor countries by providing jobs to millions, thereby reducing poverty. Around $300 billion directly reaches poverty stricken people in poor countries, which would have been misappropriated if given to the government of these countries.
Outsourcing saves as much as 60 percent on IT services, making money for workers and shareholders. It generates demand for U.S. computers, telecommunications, hardware, software, legal, financial, and marketing services. U.S. companies repatriate profits to the home country.
Because services like marketing and software are outsourced, American workers can be freed to work in more productive areas like research and development.
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