Outsourcing

Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. Outsourcing is a business decision that is often made to lower costs or focus on core competences. A related term, offshoring, means transferring work to another country, typically overseas. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. Outsourcing became a popular buzzword in business and management in the 1990s. EDS was the first company to establish the outsourcing business.

Overview

Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider.

Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.

Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Many companies look to employ expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is characterized by expertise not inherent to the core of the client organization.

The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service.

Due to this demand call centers have sprung up in Canada, China, Eastern Europe, India, Israel, Ireland, Pakistan, Philippines and even the Caribbean. Many companies, most notably Dell and AT&T Wireless, have gained significant negative publicity for their decisions to use non-US labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers.

A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.

The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. In some cases, the agents are not allowed to even give out their real name.

Outsourcing, Offshoring, and Offshore Outsourcing

Note that “outsourcing”, “offshore outsourcing” and “offshoring” are used interchangeably in public discourse despite important technical differences. To be consistent, “outsourcing”, in corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party. When this third party is located in another country the term “offshore outsourcing” makes more sense. “Offshoring”, in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not. In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. "Offshoring”, on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.

Arguments for Outsourcing

A recent poll of economists by the Wall Street Journal found that only 16 % of them saw outsourcing as having a significant impact on the overall job picture. [1]

One criticism of outsourcing is that product quality suffers. But the outsourcing firm has freedom to move a firm department or division back home if its profits are suffering as a result of poor quality. In fact, many American companies like Dell have moved customer service divisions back to America as a result of poor quality [2]. The decision to outsource is like any other business investment decision in that there is risk. Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success. The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers. If the company does it correctly, it benefits from higher profits. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm. That many large businesses outsource and continue to outsource suggests that in many cases outsourcing is successful in that it increases product quality, lowers costs substantially, or both.

Some economists have argued that outsourcing is a form of technological innovation analogous to machines on a car assembly line. American Motor Company Ford relied heavily on workers in the past to assemble car parts. Today these workers are replaced by machines because they are cheaper in the long run, produce better quality products, or a combination of both (the firm is trying to increase its quality to cost ratio, quality being defined by the consumer and inferred from revenue). Economists argue that machines on the car assembly line must have a higher quality to cost ratio than workers because, if they didn’t, there would be no incentive for the firm to replace workers with machines. Although workers’ jobs were lost from this replacement of workers with machines, the Ford Motor Company made more money by lowering costs (or increasing quality, thereby increasing revenue). Some argue that greater profits to the labor owners lead to higher consumption, which leads to further job creation, allowing those who lost jobs to gain jobs in other sectors of the economy. However, economists do concede that labor is not always perfectly mobile and that some workers may have difficulty getting new jobs. Some economists suggest that government training programs be provided.

A firm's motivation for replacing workers with machines is identical to the motivation for outsourcing, i.e. the firm is trying to maximize the quality of its product given cost (its productivity). Because outsourcing allows for lower costs, even if quality reduces slightly or not at all, productivity increases, which benefits the economy on aggregate.

Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.” [1] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as elevator operator, TV repairman and coal deliveryman. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. That in turn makes us all richer.” [2]

Professor Drezner reports that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. [3] Drezner also points out that large software companies such as Microsoft and Oracle have increased outsourcing and used the savings for investment and larger domestic payrolls. Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period. [3]

Advocates of outsourcing also claim that outsourcing-related fraud is insignificant, averring that such malpractices can occur in any country. For example, 40 million credit card numbers were stolen in June 2005 at CardSystems Solutions in Tucson, Arizona. (See the full story.). In December 2005, nearly 50 people were indicted in connection with a scheme that bilked at least $200,000 from Katrina relief fund at Red Cross claim center in Bakersfield, Calif., which handled calls from storm victims.

Criticisms of Outsourcing

Because "outsourced" workers are not actually paid agents of the company, it has been argued that there is less incentive for the agent to show loyalty or work ethic in its representation of said company. It has been therefore argued that quality levels of customer service and technical support of outsourced tasks are lower than where they have remained 'in-house'.

The 2004 US presidential election race focused on outsourcing to some degree. This debate did not center on problems of declining quality of customer services but on the threat to US jobs and work. Criticism of outsourcing, from the perspective of US citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the US government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. The poll of over 1,000 Americans was conducted in August 2004 (See Zogby International survey results online at zogby.com).

Outsourcing appears to threaten the livelihood of domestic workers and the American Dream. This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on NAFTA. Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white collar jobs are transferred to or created in foreign countries. Thus, outsourcing is criticized as it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of globalization where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority.

Criticism of outsourcing from the public and media sometimes tend to concentrate on lackluster customer service and technical support being provided by either local workers who are not actually employees of the company, or by overseas workers attempting to communicate with Americans in broken or incomprehensible English. Defenders of outsourcing say if this were true, then companies would experience market forces compelling them to return service and support handling back from the outsourced company. However, service and support are often not considered by customers as part of their original purchases. Customers only experience outsourced service and support after they have spent their money since sales is generally done in-house by the original company. Dealing with lackluster outsourced service is a negative surprise after the money is already spent.

Policy solutions to outsourcing are also criticized. One solution often offered is retraining of domestic workers to new jobs. However, some of these workers are already highly educated and already possess a bachelor's and master's degree. Retraining to their current level in another field may not be an option due to years of study and cost of education involved. There is also little incentive given that the jobs in their new field could also be outsourced as well. Proportions of workers trained for Science, Technology, Engineering, and Mathematics (STEM) fields fields in developing nations are viewed to outstrip traditional technology leaders such as the U.S. With these traditionally "safe" jobs perceived to be endangered, this raises questions regarding whether origin countries can maintain any comparative advantage given the losses in both low and high-value jobs.

There are also security issues concerning companies giving outside access to sensitive customer information. In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call center workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. (See the full report.)

Outright fraud is also a concern. In 2005, Intel discovered and fired 250 Indian employees after they faked their expense reports. The firings followed from Intel's internal Business Practice Excellence programme of expenses claims. The report concluded that fraudulent practises such as "faking bills to claim your allowances like conveyance [and] drivers’ salaries" were some common malpractices in India. Intel would not put up with such fraud. NASSCOM, which is a forum of IT and ITeS companies, has attempted to address these fraud concerns in India by creating the National Skills Registry. That database contains personal and work-related information, enabling employers to verify a staff member's credentials and allowing police to track the background of workers.

Democratic U.S. presidential candidate John Kerry blasted firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of US taxes during his unsuccessful 2004 campaign, calling such firms "Benedict Arnold corporations," in reference to the infamous traitor Benedict Arnold.

It is argued a malicious implementation of the Higher Education Role Analysis (HERA) in the UK may force Higher Education administrative and support staff to prematurely retire or seek for new employment in other organisations, thus freeing of staff many departments which could then be effectively outsourced. Outsourcing departments like Accounts, Payroll and Procurement is now common practice, as seen in August 2005 at the University of Portsmouth.

Notes

  1. ^  This view is borne out by a recent study by Richard Freeman at the National Bureau of Economic Research in Washington. He found that in the year 2000, 17 % of university bachelor degrees in the U.S. were in science and engineering compared with a world average of 27 % and 52 % in China. Universities in the European Union granted 40 % more science and engineering doctorates than the United States, with that figure expected to reach nearly 100 % by about 2010 according to Freeman's paper.
  2. 1. ^  “Outsourcing” and “Saving Jobs” by Thomas Sowell
  3. 2. ^  Should we “Save Jobs”? by Walter Williams
  4. 3. ^  "Outsourcing is the Kool" (kOOL PEOPLE)

Literature

Mark Kobayashi-Hillary. 2004. (2nd ed 2005) Outsourcing to India. ISBN 354023943X.


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(2nd ed 2005) Outsourcing to India. ISBN 354023943X. Sylt can be reached by an artificial dam (trains only), by ferry and by Sylt Airport. 2004. It is under landscape conservation since 1923. Mark Kobayashi-Hillary. Morsum is also known for the red cliff, that shows the geological history of the last five million years on its height of 21 meters. Outsourcing departments like Accounts, Payroll and Procurement is now common practice, as seen in August 2005 at the University of Portsmouth. Martin church), dating back to the same era as the one in Keitum.

It is argued a malicious implementation of the Higher Education Role Analysis (HERA) in the UK may force Higher Education administrative and support staff to prematurely retire or seek for new employment in other organisations, thus freeing of staff many departments which could then be effectively outsourced. Morsum has an historical church (St. presidential candidate John Kerry blasted firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their fair share of US taxes during his unsuccessful 2004 campaign, calling such firms "Benedict Arnold corporations," in reference to the infamous traitor Benedict Arnold. The green cliff is also located near Keitum. Democratic U.S. Severin church), dating back to the 1200s. That database contains personal and work-related information, enabling employers to verify a staff member's credentials and allowing police to track the background of workers. Keitum has a historical church (St.

NASSCOM, which is a forum of IT and ITeS companies, has attempted to address these fraud concerns in India by creating the National Skills Registry. It was built in the 1st century BC, likely as a pagan holy site. Intel would not put up with such fraud. Tinnum castle (Tinnumburg) is a circular parapet with a diameter of 120 meter and a height of 8 meter. The report concluded that fraudulent practises such as "faking bills to claim your allowances like conveyance [and] drivers’ salaries" were some common malpractices in India. The villages include Tinnum, Munkmarsch, Archsum, Morsum and Keitum. The firings followed from Intel's internal Business Practice Excellence programme of expenses claims. The population (as of 2000) is 5.500.

In 2005, Intel discovered and fired 250 Indian employees after they faked their expense reports. Sylt-Ost (East Sylt) is a township, consisting of several small villages on the Nössehalbinsel on Sylt. Outright fraud is also a concern. The city has the island's only civil airport. (See the full report.). The population (as of 2000) is 9.200. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank. It officially became a city in 1905.

In April of 2005, a high-profile case involving the theft of $350,000 from four Citibank customers occurred when Indian call center workers in Pune, India, acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. The new town was first mentioned in 1462. There are also security issues concerning companies giving outside access to sensitive customer information. After the destruction of the town of Eidum on November 1, 1436, in a great flood (Allerheiligenflut), the survivors moved to a place north-east (Wäästerlön in Söl'ring) of the original town. With these traditionally "safe" jobs perceived to be endangered, this raises questions regarding whether origin countries can maintain any comparative advantage given the losses in both low and high-value jobs. Braderup, located between Wenningstedt, Kampen, and Munkmarsh, has a beautiful heath (Heide) and much nature. Proportions of workers trained for Science, Technology, Engineering, and Mathematics (STEM) fields fields in developing nations are viewed to outstrip traditional technology leaders such as the U.S. Wenningstedt is known for the white cliff and the Denghoog stone grave, a walk-in grave made of huge stone walls from 3000 BC.

There is also little incentive given that the jobs in their new field could also be outsourced as well. Hörnum is the southernmost city of Sylt. Retraining to their current level in another field may not be an option due to years of study and cost of education involved. www.kampen.de. However, some of these workers are already highly educated and already possess a bachelor's and master's degree. Kampen is known for the Red Cliff and its fine life style. One solution often offered is retraining of domestic workers to new jobs. List is famous for oysters.

Policy solutions to outsourcing are also criticized. The German Luftwaffe (Airforce) used List as an airbase. Dealing with lackluster outsourced service is a negative surprise after the money is already spent. It was first mentioned in 1292 and was Danish territory until 1864. Customers only experience outsourced service and support after they have spent their money since sales is generally done in-house by the original company. It has a population of about 2.500 (as of 2000). However, service and support are often not considered by customers as part of their original purchases. List has a harbor (ferries to Rømø, Denmark) and is the most northern point of Germany.

Defenders of outsourcing say if this were true, then companies would experience market forces compelling them to return service and support handling back from the outsourced company. Today, Sylt is mainly a tourist attraction, famous for its healthy climate, and several German celebrities who own a house on the island. Criticism of outsourcing from the public and media sometimes tend to concentrate on lackluster customer service and technical support being provided by either local workers who are not actually employees of the company, or by overseas workers attempting to communicate with Americans in broken or incomprehensible English. Due to mass immigration, its usage is very low (it is only spoken by a few percent of the population) and has little chance to survive. Thus, outsourcing is criticized as it represents a new threat to labor, contributing to rampant worker insecurity, and reflective of the general process of globalization where the United States government fails to mediate business-labor relations in a way conducive to prevailing values that places the American middle class worker as a central priority. The indigenous Sylt language, Söl'ring, is a unique dialect of insular North Frisian, with elements of Danish, Dutch and English. Outsourcing appears to work contrary to the claim that “free trade” will create the “jobs of tomorrow” in America when high-tech or high paying white collar jobs are transferred to or created in foreign countries. Children will receive sweets and/or money.

This is especially true for high-tech workers who were promised the “jobs of tomorrow”- a phrase Bill Clinton iterated in 1994 to justify his conservative position on NAFTA. This is called Rummelpottlaufen. Outsourcing appears to threaten the livelihood of domestic workers and the American Dream. Like in most areas of Schleswig-Holstein on New Year's Eve, groups of children go masked from house to house, reciting poems. The poll of over 1,000 Americans was conducted in August 2004 (See Zogby International survey results online at zogby.com). The island has 21,000 inhabitants. A Zogby International poll reports that 71% of American voters believe that “outsourcing jobs overseas” hurts the economy and another 62% believe that the US government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource. The highest point is 52 meter.

Criticism of outsourcing, from the perspective of US citizens, by-and-large, revolves around the costs associated with transferring control of the labor process to an external entity in another country. From North to South it is 35 km, from West to East it is 13 km. This debate did not center on problems of declining quality of customer services but on the threat to US jobs and work. Sylt has 99 km2. The 2004 US presidential election race focused on outsourcing to some degree. . It has been therefore argued that quality levels of customer service and technical support of outsourced tasks are lower than where they have remained 'in-house'.
.

Because "outsourced" workers are not actually paid agents of the company, it has been argued that there is less incentive for the agent to show loyalty or work ethic in its representation of said company. The island was once part of the mainland, and is still shrinking due to erosion from the North Sea. In December 2005, nearly 50 people were indicted in connection with a scheme that bilked at least $200,000 from Katrina relief fund at Red Cross claim center in Bakersfield, Calif., which handled calls from storm victims. It belongs to the North Frisian Islands. (See the full story.). Sylt (Danish: Sild, Frisian: Söl) is an island in northern Germany, part of Nordfriesland, Schleswig-Holstein. For example, 40 million credit card numbers were stolen in June 2005 at CardSystems Solutions in Tucson, Arizona. Heinz Reinefarth.

Advocates of outsourcing also claim that outsourcing-related fraud is insignificant, averring that such malpractices can occur in any country. Lager Sylt, the concentration camp on Alderney was named after it. [3]. During World War II, Sylt becomes a fortress, with concrete bunkers built below the dunes at the shore, some of which are still visible today. Nationally, 70,000 computer programmers lost their jobs between 1999 and 2003, but more than 115,000 computer software engineers found higher-paying jobs during that same period. In 1927, a causeway to the mainland is built, named after Paul von Hindenburg, with a railway on top. [3] Drezner also points out that large software companies such as Microsoft and Oracle have increased outsourcing and used the savings for investment and larger domestic payrolls. During World War I, Sylt becomes a military outpost, but does not suffer from war damage.

Professor Drezner reports that for every dollar spent on outsourcing to India, the United States reaps between $1.12 and $1.14 in benefits. In the 19th century, tourism starts; Westerland replaces Keitum as the capital. That in turn makes us all richer.” [2]. Keitum becomes capital of the island, and a place for rich captains to settle down. ‘Creative destruction’ is a discovery process where we find ways to produce goods and services more cheaply. During the 17th century and 18th century, whaling, fishing and oyster breeding increase the wealth of the population. The automobile cost the jobs of people who took care of horses or made saddles, carriages, and horseshoes.” [1] Walter Williams, another economist, said “we could probably think of hundreds of jobs that either don't exist or exist in far fewer numbers than in the past--jobs such as elevator operator, TV repairman and coal deliveryman. Except for the town of List, Sylt becomes part of the Duchy of Schleswig in 1435.

Economist Thomas Sowell from the University of Chicago said “anything that increases economic efficiency--whether by outsourcing or a hundred other things--is likely to cost somebody's job. Sylt was divided between the Duke of Schleswig and the Kingdom of Denmark in 1386. Because outsourcing allows for lower costs, even if quality reduces slightly or not at all, productivity increases, which benefits the economy on aggregate. First settlements of Frisians during the 8th century and 9th century. the firm is trying to maximize the quality of its product given cost (its productivity). Hengist and Horsa embark from Sylt for England in the 5th century. A firm's motivation for replacing workers with machines is identical to the motivation for outsourcing, i.e. Sylt was originally part of Jutland (today Denmark and Schleswig-Holstein).

Some economists suggest that government training programs be provided. However, economists do concede that labor is not always perfectly mobile and that some workers may have difficulty getting new jobs. Some argue that greater profits to the labor owners lead to higher consumption, which leads to further job creation, allowing those who lost jobs to gain jobs in other sectors of the economy. Although workers’ jobs were lost from this replacement of workers with machines, the Ford Motor Company made more money by lowering costs (or increasing quality, thereby increasing revenue).

Economists argue that machines on the car assembly line must have a higher quality to cost ratio than workers because, if they didn’t, there would be no incentive for the firm to replace workers with machines. Today these workers are replaced by machines because they are cheaper in the long run, produce better quality products, or a combination of both (the firm is trying to increase its quality to cost ratio, quality being defined by the consumer and inferred from revenue). American Motor Company Ford relied heavily on workers in the past to assemble car parts. Some economists have argued that outsourcing is a form of technological innovation analogous to machines on a car assembly line.

That many large businesses outsource and continue to outsource suggests that in many cases outsourcing is successful in that it increases product quality, lowers costs substantially, or both. Proponents of outsourcing believe that arguing that outsourcing leads to lower product quality is pointless because if it were true, consumer demand will force firms to shift back to producing the good or service in-firm rather than out-firm. If the company does it correctly, it benefits from higher profits. The decision to outsource is like the decision to expand a business overseas, to incorporate computer technology, or to hire new workers.

Critics of outsourcing often talk about outsourcing failures without mentioning instances of outsourcing success. The decision to outsource is like any other business investment decision in that there is risk. In fact, many American companies like Dell have moved customer service divisions back to America as a result of poor quality [2]. But the outsourcing firm has freedom to move a firm department or division back home if its profits are suffering as a result of poor quality.

One criticism of outsourcing is that product quality suffers. [1]. A recent poll of economists by the Wall Street Journal found that only 16 % of them saw outsourcing as having a significant impact on the overall job picture. "Offshoring”, on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.

In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. “Offshoring”, in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not. When this third party is located in another country the term “offshore outsourcing” makes more sense. To be consistent, “outsourcing”, in corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party.

Note that “outsourcing”, “offshore outsourcing” and “offshoring” are used interchangeably in public discourse despite important technical differences. In some cases, the agents are not allowed to even give out their real name. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system.

In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business. A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one.

Many companies, most notably Dell and AT&T Wireless, have gained significant negative publicity for their decisions to use non-US labor for customer service and technical support; one of the most prominent complaints being the expectation that the replacement staff will have more trouble communicating with customers. Due to this demand call centers have sprung up in Canada, China, Eastern Europe, India, Israel, Ireland, Pakistan, Philippines and even the Caribbean. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service. The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers.

Outsourcing business is characterized by expertise not inherent to the core of the client organization. Many companies also outsource customer support and call center functions, manufacturing and engineering. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies look to employ expert organizations in the areas targeted for outsourcing.

In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking.

Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider. .

EDS was the first company to establish the outsourcing business. Outsourcing became a popular buzzword in business and management in the 1990s. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. A related term, offshoring, means transferring work to another country, typically overseas.

Outsourcing is a business decision that is often made to lower costs or focus on core competences. Outsourcing (or contracting out) is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity (such as a subcontractor) that specializes in that operation. ^  "Outsourcing is the Kool" (kOOL PEOPLE). 3.

^  Should we “Save Jobs”? by Walter Williams. 2. ^  “Outsourcing” and “Saving Jobs” by Thomas Sowell. 1.

Universities in the European Union granted 40 % more science and engineering doctorates than the United States, with that figure expected to reach nearly 100 % by about 2010 according to Freeman's paper. were in science and engineering compared with a world average of 27 % and 52 % in China. He found that in the year 2000, 17 % of university bachelor degrees in the U.S. ^  This view is borne out by a recent study by Richard Freeman at the National Bureau of Economic Research in Washington.

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