Outsourcing is Good for Economy

Essay by ucfthug4uUniversity, Bachelor'sA-, April 2005

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Outsourcing is the act of obtaining services from an external or another firm. Lately, outsourcing has become a "charged" word in political and business world due to many job losses. It is an important concept to understand because of its business (both corporations and for small businesses) and because of its political implications. In a corporate environment, the term "outsourcing" often refers to a particular type of outsourcing, Business Process Outsourcing (BPO). BPO occurs when an organization turns over the management of a particular business process (such as accounting or payroll) to a third party specialist. The underlying theory of outsourcing is that the BPO firm can control specific function of an original company so they can run more efficiently, allowing reduction in cost control, and freeing up capital. Even though, many people believe that American economy did not grow after 2001 and unemployment number increased due to outsourcing but, a paper written by the International Monetary Fund shows that outsourcing does not lead to losing American jobs.

The concept of outsourcing was first made popular by Ross Perot when we founded Electronic Data Systems (EDS) in 1962. EDS would say to a potential client, "You are good at designing and manufacturing widgets, but we are skilled with managing information technology. We will sell you the IT services that you require, and you can pay us periodically with a minimum commitment of two years." Today, EDS is a multi-billion dollar company with over 70,000 employees and is only one of many global BPO firms. Outsourcing can be a management tool to assist business to develop in the non-core areas in firm where they can get best return on their investment. For example: High cost payroll departments or accounting, internal weaknesses in management or shortcomings and limited capacity are areas...