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Outsourcing, the other story.

EVERY ERA HAS UNIQUE ECOnomic dynamics. Globalization is the new phenomenon of the 21st century. Under the prevailing circumstances, the advancements in telecommunication and computer technology have altered the way businesses are being carried out. We are marching toward the concept of a "global village" and invariably the economic implications of this era of free trade are global.

Outsourcing has emerged as the new buzzword in this global economy, creating a heated debate about its economic and human resource impact.

The one main argument against outsourcing of jobs to overseas locations is the loss of jobs in the local environment. We cannot deny that outsourcing has resulted in loss of jobs for a small segment of the working population, nor can we deny its positive impact on the U.S. economy as a whole.

Moreover we are already witnessing the promised reinvestment of the profits earned from outsourcing. Delta Airlines has managed to add 1,200 new positions in the U.S. from the cost savings it created by moving 1,000 jobs to India.

Outsourcing has not only enabled companies to thrive in the face of high operating costs but also increased global competence. According to Nasscom--India's National Association of Software & Service Companies--"U.S. banks, financial services and insurance companies have saved $6 billion to $8 billion in the past four years owing to IT outsourcing to India." Nasscom also states: "Helped by these savings, companies have prevented layoffs and instead added 125,000 more jobs."

As economists suggest, outsourcing will be an inevitable eventuality in this global competitive market. Protectionist policies would not only drastically affect the competitive strength of our national entrepreneurs but also increase the price of commodities in the local market. Protectionists have to realize that more than 60 percent of U.S. IT revenue is generated from overseas nations.

Outsourcing is a global phenomenon and shouldn't be perceived as a trend peculiar to the United States. Any attempt to hinder the open global market would definitely have serious economic repercussions for the United States as it is both the world's largest exporter and importer of goods and services. Further, the outcry against the movement of service industry jobs abroad is really exaggerated: Only 400,000 IT related jobs went overseas between 1993 and 2003, during which period employment in the United States increased from 129 million to 138 million, with growth particularly in the service industry.

It certainly helps to remind ourselves that we had similar apprehensions when computers started to invade the corporate market. People were complaining about the loss of jobs due to computerization and automation. But now computers have become an everyday part of our lives, and they have created a tremendous impact on our national economy and improved the efficiency in every aspect of our life. It clearly would not have been a better choice to avoid using computers just because automation of tasks would eliminate clerical and other routine office jobs. In fact, computerization created a whole new pool of well-paid jobs. Similarly, outsourcing cannot be avoided because some people lose their jobs initially.

Ultimately it is the consumers who stand to benefit by the cost reduction and improved operating efficiency created by outsourcing. Outsourcing will bring more profitability, more investment and more and better jobs in the local market.

Employment preliminary figures in July 2005 stand at 133.7 million while it was 131.5 million last year, which clearly contradicts the employment-related fears.

There is no question of doubt that outsourcing is here to stay and it will definitely contribute in a positive manner to the national economy.

Ronald E. White Sr., PhD., is an adjunct professor at the University of Central Arkansas at Conway. E-mail him at
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Title Annotation:Commentary
Author:White, Ronald E., Sr.
Publication:Arkansas Business
Date:Aug 29, 2005
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