Understanding Outsourcing © Bhumika Ghimire


Introduction: History of outsourcing

Outsourcing, or sending off a job outside the company,may seem like more recent phenomena which started after the internet boom in mid 1990s, but the fact that outsourcing’s history is as old as America may surprise us. During the early years of America, the manufacturing of clippers ships’ sails was sent to Scotland, and the raw material came from India. India was also an outsourcing destination for British textile industry during the 1800s, but eventually the British become more efficient and outsourced job came back to Britain.

In more recent times, during 1970s computer companies used to outsource their payroll processing. The job was sent to company in another state or city, not overseas. Unlike today offshore outsourcing was not common in those days. Late 1980s saw emergence of offshore outsourcing when companies started sending off their manufacturing jobs overseas. This trend got boost from the increasing technical advancement and the 1986-94 Uruguay Round of talks which lead to the creation of WTO. Kodak and American standard were among the first companies to outsource.For more names of American companies outsourcing their jobs, you can visit the following link on CNN's website. Click Here

So why does outsourcing happen? Looking at it from the American prespective, I have come across the following reasons:Depleting talent pool in USA, Raising cost of hiring qualified personnel, Spread of technology across the globe,Increasing ease of doing business globally and the abillity to service a large market.The following paper talks about the reaons in detail. Click here for the report .We can see that the reason for outsourcing is not entirely based on cost cutting or raising the profit margin.There is much more involved in a company's decision to outsource.But the raising opposition of outsourcing in USA is choosing to neglect the factors which forces a company to outsource, they are painting the companies as profit hungry and caring only about the share holder money.During the course of this study we aim to present a more balanced picture of outsourcing, not as a total positive or total negative force.


Kelly, Terry (2005). A Brief History of Outsourcing.http://www.globalenvision.org

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