Perspectives on Outsourcing in the IT Industry

At the beginning of the 21st century, IT is viewed as a strategic tool that helps organizations to expand their activities and increase profits. IT outsourcing is often seen as an opportunity to provide a competitive advantage and increased value for the enterprise. The absorptive capacity based on appropriate technology-related skills needs to be measured against both the demands of the international economy and the local environment where a skills base for using IT is even more important.

Changes in management philosophy are giving opportunities to the small and medium-sized enterprises that cater to the demands of national and internationally operating companies. However, the businesses that fare well under the new management organizational scenario are those which acquire the necessary business, commercial, and technological skills.

The main causes of outsourcing are prices and wages, communication, and transportation costs. For many companies, capacity building to develop appropriate skills is a dynamic process. As technologies change at increasingly dramatic speeds, so do the skill requirements of people in businesses and their everyday lives. Lifelong learning is becoming the essential prerequisite for lifelong employability and there is growing emphasis on multi-skilling and the ability to learn new skills.

The main factors to reject outsourcing strategies are lack of financial resources and the size of the company. For a small company, it would be more difficult to expand its activities and sustain stable growth rates and flexibility. The main risks associated with IT outsourcing are reduced flexibility, low-cost savings, and low quality. The problems of structural adjustment are even greater for developing countries that lag far behind the advanced industrialized economies in their flexibility to cope with these challenges (Bielski 40).

The benefits associated with outsourcing involve strong competitive advantage and cost savings, cost restructuring, improve quality, knowledge and operational expertise, capacity management and commoditization, customer pressure, time zone, risk management. Of these, entry into the niche, customized software development market including systems integration services is probably the most costly and carries the highest risk. The distancing of relationships with organizations in developed countries and the removal of opportunities for learning about the operation of markets and businesses in the industrialized country context could have less positive, longer-term ramifications. The factors affecting India’s software exports are the relatively low-skilled IT professionals (Williams 60).

In addition, industrialized countries retain the most highly-skilled tasks of analysis and design, thus creating an international skill division of labor. IT facilitated a globalization process that not only lead to direct employment impacts but also technology and knowledge. This could help companies to ‘catch up’ with many obvious economic and social benefits. The extent of this ‘catching up’ is dependent on many factors, such as the political, cultural, economic, and social infrastructure, and the capability of the country to benefit from technological spill-overs and accumulated technology (Murray and Crandall 4).

In cases where this is technically possible, the cost advantage of outsourcing will probably apply to parts of production processes, leading to outsourcing by the developed economies. Indeed in the current period, the large growth in merchandise trade relative to merchandise products in the less developed economies can be attributed both to the increased number of exporting final goods to the developed economies and also to the growth of the latter’s outsourcing.

Both developments act to reduce the bargaining power of labor, especially union labor. When rules limit direct investment and outsourcing, both producers and labor want enforcement of labor standards abroad to maintain competitiveness for their products. Once the rules are relaxed, the interests of producers and consumers diverge, as low wages and lax labor standards make foreign production more profitable. “An increasing number of engineering jobs are being moved overseas by U.S. companies, yet it’s not clear if the offshoring trend will erode our competitiveness or provide long-term benefit” (Williams 60).

The threat to move all or part of production abroad can be used at home to exact reductions in labor compensation (wages plus benefits). Moreover, the threat of significant job losses allows large firms to demand changes to labor legislation that further weaken labor. In addition to endangering jobs, wages, labor standards, and union powers, globalization also hastens the decline of social safety nets. Citing international competitiveness, the business has been able to shift the tax burden to labor. But job losses and low wages will erode this tax base, reducing governments’ ability to finance welfare programs. Globalization thus undermines labor strength, reinforcing the impact of higher levels of overall unemployment on capital’s ability to control the workplace in developed economies (Gordon and Zimmerman 97).

What is different today is the frequency of these changes and the greater cataclysmic effect for the individuals involved. But a simple fact remains: At the point where work gets done, workers are functioning at various levels of skill and knowledge and adapting to a variety of physical, social, and environmental conditions to perform tasks to specified standards. Those tasks must be documented and understood by HR specialists so they can apply their measures, generalized tools, and consulting skills to help select workers, train them, appraise their performance, give them constructive feedback, and adapt their environments to achieve optimum productivity and worker growth.

To begin with, its task formulations come directly from SMEs in their own words. They are revealing as no checklist can be because they link the essential information that must be linked–behaviors and results. This is the information necessary to understand the work-doing system and manage its HR dynamics. Continuous involvement of an HR staff member to implement findings, and if feasible, to extend its application to other occupations is desirable. Although the findings may have ramifications beyond the immediate problem for which initially employed, it is wise to keep focused on the particular problem and how SMEs contribute to the solution (Doig et al 25).

With government support, people will pursue careers to achieve stability, security, relationship with others, personal growth, and ultimately status, prioritizing these goals according to their value system. For much of the past century, when the drive for careers matured as a goal in offers of employment and vocational development, this was a very tenable and fulfilling pursuit. Careers provided opportunities for individuals with potential and determination to aspire toward goals that enabled them to achieve comfortable economic status. It provided employers with dedicated employees. As the new millennium approaches, the pursuit of careers appears to be in a state of flux (Williams 60).

The turmoil in the industry brought about by global competition and industrial consolidation has shaken the concept of stability and the idea of lifelong employment in a single occupation for a single employer. Employers are less able to offer lifelong employment in a clearly defined occupational niche. Technological change and the enormous expansion of knowledge have blurred the lines of career content. Today, it appears, nothing less than lifelong training and education is necessary to stay current let alone get ahead in a career field. It is not that the idea of pursuing a career is no longer feasible.

Rather, a career–in the sense of achieving stability, security, and personal growth must be pursued differently. The primary focus of these goals has moved from the employer, industry, or profession, to the individual. An individual can no longer rely on a career label, even a licensed one, to provide the niche of security, stability, and status. Instead, an individual must be able to deliver high performance in highly changing situations (Cocheo et al 40).

In sum, IT outsourcing helps companies to improve their main operations and service quality, gain a competitive advantage and save costs. It proposes company opportunities to reduce labor costs and increase service volumes and several traditional services proposed to customers, restructure the business and invest in personal growth and development. Outsourcing is a temporal problem that affected the US labor force. To help individuals visualize their potential as well as likes and dislikes in the world of work, and to empower them in seeing themselves as whole persons, the state and corporations should help young workers adapt to the environment.

Although individuals choose to focus on one or another functional area, they tend toward whole-person involvement in their work and private lives. Affordable housing and stable work are the main priorities of many families. The career pattern of the future will more likely resemble a web, an interconnected series of lateral moves within and among employers by workers taking responsibility for themselves as they move between employers. In such an environment, workers require personal flexibility and self-insight that can be honed by career development coaching.

Works Cited

Bielski, L. “Still Hunkered Down: All’s Quiet on the IT Budget Front, with a Few Standout Exceptions”. ABA Banking Journal, 95 (2003): 40. Print.

Cocheo, S. “Globalthink or Job Shrink: Offshore Outsourcing Brings Some Banks Key Benefits. If Only It Didn’t Carry All the Cachet of Leprosy. A Look at What’s Actually Happening”. ABA Banking Journal, 96 (2004): 40. Print.

Doig, S. J., et al. “Outsourcing Gone Too Far?” The McKinsey Quarterly, 2001, p. 25.

Gordon, C., Zimmerman, A. “High-Tech Outsourcing: A Benefit-Cost Framework” American Economist, 51 (2007): 97. Print.

Murray, M. J., Crandall, R. E. “IT Offshore Outsourcing Requires a Project Management Approach.” SAM Advanced Management Journal, 71 (2006): 4. Print.

Williams, J. “IT Pragmatics: Some Perspectives on Outsourcing”. The Public Manager, 30 (2001): 60. Print.

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