Do you really need outsourcing?

The difference in various economies brings about the very need for outsourcing. The most powerful economies in the world need to get quality work done at the most economical rates. This very need drives the concept of outsourcing. There is a vast difference in the income levels of people across the world. The primary reason for this is the difference in the standard of living. Prosperous economies have higher income brackets. This typically means that the cost of operating a business in a developed economy is quite high because the labour charges are more.

So what do businesses need? They really need cheap yet skilled labour. Countries like China and India provide incredible quality of cheap labour. Let’s take the simple example of software industry. If American or European companies really needed to take advantage of the revenue difference then they need to outsource their work. An entry-level software engineer knowing a web-based technology like Java would demand anywhere between $48k and $60k in US. If the company outsources its operations to India then a similar level professional would charge between $6000 and $8000. Now that’s a wide gap. The company might hire 7 more people in India at the cost of one person in US.This is the fundamental of outsourcing. Although this restricts countrymen from getting jobs it helps businesses because they are able to maintain higher margins and in turn grow at a faster rate.

The cons of outsourcing lie in its pros. Outsourcing increases the dependency of the developed economy on the developing economies. Now let’s say that a lot of work gets outsourced to China. This means that now people in China have good amount of jobs. At the same time people in US are suffering from job loses. This directly impacts the economy of US. On the other hand, Chinese economy grows but only till a certain point. For it to grow further, it would really need the US economy to prosper because that would increase the number of businesses in US.

Hence, there has to be a proper harmony of outsourcing and home jobs to ensure growth of businesses and economies.

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