Outsourcing is a constant part of normal trade exchange for decades. In the recent years the quantitative expansion of outsourcing of services is a reflection of advantages of division of labor and trade globally. With globalization on its advent outsourcing has become cheaper and beneficial to many nations.
The developing nations which are primary exporters of services benefit from the recent trends and processes by which it is eligible to sell its services and products in the international market i. e. the globalization trend
Technological advances in the fields of communication, transportation, information processing, web development, graphics and animation and many others have contributed to the development of trade exchange processes among industrial and not-so industrial nations.
What was primarily costly and thus not viable has become much affordable in this perspective. Although a typical industrial economy suffers from the threat of home services being replaced by outsourced services, it has been found the international outsourcing of material inputs is still larger than that of services.
Historically the service sector has always been resistant to international competition in all nations across the globe. Industries and individuals could benefit mostly from import of manufactured goods with economies opening up. With improved e- communication and the all inclusive facilities that internet provided services started crossing the political borders.
Many service industries actually had to physically relocate themselves to access the international markets prior to the era of communication technologies. Now outsourcing had made it possible for those institutions to operate from their home country and access skilled labor at costs which were cheaper.
The industrial nations that are mainly importers of such services as a result developed a fear of job loss in their home ground and anticipated huge unemployment in countries like USA, UK and Australia. These countries soon introduced legislation that restricted outsourcing for government and government supported organizations.
It was really becoming important to examine the trends of outsourcing as a natural cause to loss of employment. It was clear that free trade options are meant to improve welfare of nations on the whole but there were possibilities of some section of the economies to undergo a threat of being replaced or disowned for their services.
In countries like USA outsourcing is still limited to import of business services and computing and information services. These comprise accounting services, management services, consulting, call centers, back office operations, consulting, call centers, hardware industry services and consultancy, software implementation and data processing.
It has been found from research documents and reports that the job losses in one industry due to outsourcing are offset by jobs created in the growing industries. Manufacturing firms that are the largest importers of outsourced services actually outsource business processes. Outsourcing of business processes replaces an amount of their labor for cheap labor exchange from outsourcing firms.
But as a recipient of cheap and skilled labor the cost of production eventually comes down and leads to more efficiency of the firm it its core sectors. Development of research and development wings could considerably compensate the job loss due to outsourcing of its business processes.
With lower labor costs as production efficiency of such firms increase the capacity to provide inputs to other sectors at lower prices also increase considerably. This creates a higher demand for products with increase in production efficiency. This demand could be met by increasing the productivity of the existing employed individuals or by hiring new individuals to meet the increasing demand in the market.
Thus outsourcing is gradually meant to help firms achieve economies of scale and help in new job creation. There could only be a skill mix of jobs but absolute job loss is never perceived as a result of successful outsourcing. On the contrary outsourcing helps organizations to focus on their core strategies and concentrate on their expansion plans.