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Outsourcing Has Reduced US Costs and Saved Many US Companies from Bankruptcy

Has outsourcing really cost the US economy dearly or has it actually helped save US companies from going bankrupt? All the flak notwithstanding, this article endeavours to show why outsourcing is the need of the hour for the US economy, recession or no recession.

 

Wilmington, DE -- (ReleaseWire) -- 02/07/2012 -- “U.S. software and technology companies will save $21 billion a year by 2008 through hiring workers in India and other low-cost nations, adding $124 billion to the U.S. economy, an industry-funded study forecast.The cost savings will cut U.S. inflation, increase productivity, boost wages and create 317,367 new jobs over the next five years, according to a study funded by the Information Technology Association of America, which is based in Arlington, Virginia, and represents 500 companies such as AT&T Corp., Amazon.com Inc. and International Business Machines Corp.” ('US Firms To Save From Outsourcing', Bloomberg News Service)

Outsourcing may have come in for a lot of flak from anti-outsourcing lobbies in the US, but the fact of the matter is that outsourcing has in fact been the one bailout option that has saved many US companies from going totally bankrupt. During and post-recession, what outsourcing did was to actually help save jobs, help companies that were already reeling under the financial onslaught save several hundred dollars and actually create fresh opportunities. It sounds unbelievable, and even fantastic, but it is nevertheless the truth.

Cut to the recession that brought world economies to their knees in 2008. As the disbelief subsided and gave way to shock and then panic, it was outsourcing that saved the day for scores of big and small companies across the US. It is true that recession did bring closure to many firms, many departments, handed the pink slip to thousands of Americans – but that backlash had to happen. Outsourcing stalled further decline into a deeper abyss of financial gloom.

“According to research data, more than 400,000 U.S. jobs had moved abroad and the total is estimated to hit 3.3 million by 2015. That’s just above 200,000 jobs lost every year to global outsourcing, a trivial problem in the context of the normal churn of the U.S. economy, where about 7 million jobs were gained and lost in each of the previous four quarters”. (How Outsourcing Affects the US Economy! By Hasan in dirjournal.com)

When US companies outsource, they benefit from:

1.Cheap, imported talent and skilled professionals

2.Substantial cost savings on infrastructure

3.Substantial cost savings on hardware, software and technology

4.Freeing their company's manpower and resources to be better utilized in strengthening their core functions

5.Not having to invest in extra office space, office rent, accounts and HR

6.Retaining a competitive edge over their rivals because of increased efficiency and lowered operational costs

7.Freedom from government regulations, red tape, employment taxes and insurance and unexpected lawsuits in the event of unlawful (perceived) termination of employee services

8.Distribution of risk. When a company outsources certain functions, the risks associated with that function are also outsourced as a natural course of events to the service provider who has expertise in that particular function (example, payroll processing)

During the recession, companies in the US that could have gone under or were faced with the unpleasant task of laying off their employees, managed to steer clear off that decision by outsourcing low-end jobs (data entry, payroll processing, customer service) to low-costing but skilled professionals from Third World countries like India. Since labour costs are substantially lower in Asian countries, US companies stood to gain a whopping 60 percent savings in costs. What this resulted in was that the money saved was then poured back into keeping the company afloat. In other words, jobs that could have been laid off were not.