The Effects Of Indian Information Technology Outsourcing On American Companies Research Papers Example
Outsourcing undoubtedly plays a major role in the United States economy today. Without outsourcing, the globalized economy that the United States has come to rely on quite heavily would not exist; the country would have remained in the post-industrial, but pre-globalized world. Because of the changes in technology and the advancements in science that have been made, it is almost impossible to imagine returning to a time before there was a globalized world. However, with all these changes and advancements came a number of challenges for the United States as well. As the United States moved jobs overseas and restructured their business models to reflect the new world system, people who were previously employed found that their jobs had disappeared; a number of negative effects occurred as a result of globalization and outsourcing. At this point, it would be impossible to stop outsourcing to other nations without a fundamental change in the structure of American business; however, there are options that American businesses have insofar as dealing with the issues related to outsourcing are concerned.
Job creation and destruction is one of the most common issues related to outsourcing in the United States, especially insofar as outsourcing Information Technology (IT) jobs is concerned. Many people are unhappy about the outsourcing to India because these jobs are not unskilled jobs; it takes skilled labor to fill information technology professionals’ positions, and many of these professionals are no longer able to find work in the country. This presents a serious problem, both to workers and to companies. When skilled workers cannot find jobs in their field, the economy tends to stagnate; having a plethora of skilled workers who are working under their employment level is not necessarily good for the economy, because under-employed people tend to be unwilling to stay in their current job and are more willing to explore outside options.
Indian IT outsourcing is interesting to investigate, especially insofar as it is connected to United States companies. India is often associated with call center outsourcing, but the slowing economy in the United States and the relatively small difference between the wages paid to an employee in India and an employee paid in the United States has meant that the call center economy in India is shrinking. In its place, many Indians are studying information technology services, and Indians are working in these jobs, both remotely and as on-site employees.
This raises the question of why employers like to use outsourced employees in their companies, especially employees like Indian employees. The wages are indeed lower in many cases, but there are also issues of job destruction in the United States. However, the truth is that employers will often outsource jobs when they feel that it will benefit the corporate structure and business objectives of the company or organization to do so. Companies are not always equipped to handle every problem that may arise in every situation; investing time, manpower, and intellect into solving every problem that arises would be mismanagement of company capital and resources. Instead, it makes sense for the company to invest its time in a company or group of people who specialize in solving a certain problem—for instance, Indian information technology companies are often specialist in specific information technology related issues, and are more efficient and effective for a company than trying to solve the problem independently.
When it comes to outsourcing, the primary goal for a company is to streamline the business processes of the organization. Without synergy in business processes, the company or organization may start to lose money or efficiency. When it comes to information technology, there is a disconnect between those who use technologies that require IT support and those who are educated to provide that support. The United States is one of the business leaders of the world, but India produces almost a million new information technology specialists per year. In terms of sheer numbers, India has the United States beaten by far; India has cornered the market on new information technology specialists.
It makes sense, then, for companies that are looking for information technology specialists to turn to India. The Economist, one of the largest publications focused on the business world today, writes “Hackett estimates that over the period from 2002 to 2016 offshoring is likely to claim a total of 2.1m business-services jobs at big American and European companies. Still more jobs will have been lost in business processes Hackett says that about 150,000 business-services jobs a year are still being shifted from Europe and America; the offshoring of services remains in full swing. But the firm also predicts that the migration of services to India and to other offshore locations such as China and Brazil will slow down after 2014 and stop entirely by 2022” (The Economist). What does this mean for the relationship between India and America? It means, of course, that it will change entirely. The glut of Indian information technology specialists that have come out of India in recent years is the result of the growing demand of the IT industry; when that growth slows, many of those individuals will not necessarily have jobs, and will have to change their employment strategy. In addition, it seems likely that numbers of IT students will shrink as well.
One thing that is commonly noted is that the level of quality in information technology out of India and China is much worse than the quality one would receive in the United States. It is for this reason that Indian developers do not get the same kind of business as information technology professionals; it seems unlikely as well, then, that these information technology professionals will be able to seamlessly transition into a more developer-based position.
The relationship between the United States and India is tenuous, although it is not tenuous or strained in the same way the relationship with China is strained. American companies are willing to utilize Indian companies and individuals for their talents and for the relatively cheap labor, but when they are looking for quality work, American businesses rarely employ Indian contractors to do the work (The Economist). As can be seen in the following image, the labor turnover in Indian firms is quite high. This image shows the level of labor turnover in firms that have outsourcing or offshoring agreements with businesses in the United States.
There are a plethora of reasons why outsourcing can be positive for a company, and a plethora of reasons why it can be destructive. What matters just as much as why is how outsourcing is done: when companies choose to utilize outsourcing as a tool rather than a necessity, it becomes much more efficient and effective as an overall tool for the company. For instance, a company must look at the cost/benefit analysis for keeping the labor domestic before automatically assuming that outsourcing or offshoring is the best solution; in many cases, there may be a cheaper way to keep the business domestic, and therefore ensure that quality control can be overseen more extensively by the company or organization as a whole.
It is impossible to overstate how complex the relationship is between the United States and India, particularly in the business world. Indian business is heavily dependent upon American companies, but American companies are increasingly dependent upon Indian businesses as well for many of the day-to-day tasks of their organizations. This creates a kind of mutual need and partnership in which both parties are reliant upon each other in mutual symbiosis; however, if either party were to change tactics, the other would suddenly experience collapse.
Large companies do most outsourcing of their business processes. Smaller companies are more likely to keep their business interests domestic, because it costs a lot to outsource in small quantities. However, even this generalization is difficult to make, because there are many small businesses that do indeed do some outsourcing. Understanding that outsourcing is an inevitable part of society today is the first step to understanding the interaction between companies and their outsourced counterparts; the economy as a whole is dependent upon these interactions, checks, and balances between organizations and individuals.
The Economist,. 'On The Turn'. N.p., 2013. Web. 2 Apr. 2015.
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