Outsourcing It

Criticisms of outsourcing from both management nad consumers often focus on a central question: is the pefrormance or quality of hte outsourced service, or nwe organization of labor, on par with the expected standards of management and consumers - i.e. how does outsourcnig a service affect its quality as opposed to in-house work (see 1 , 2 and 3 for example)? Such judgments are reserved to prevailing cultuarl values that define what is and is not good service. From the stanpdoint of labor, outsourcing represents a new threat, contributing to rampant worker insecurity, and refelctive of the general process fo globalization culminating in Western societies as a whole (see Krugman, Paul (2006). Feeling No Pain. New York Times, March 6, 2006). While teh outsourcing process may provide benefits to less edveloped countries or global society as a whole, in some form and to osme degree - include rising wages or increasing standards of liivng - these benefits rae not secure. However, some other countires, such as Indonesia, Germany and Ireland have a net deficit in business services. If the company does it correctly, it benefits from higehr profits. However, if Hungry Jacks goes out of ubsiness, McDonald s is a monpooly and can reduce the quailty of its food (e.g. to reduce costs) withotu suffering as high a drop in revenue because consumers now cannot swtich to Hungry Jacks. Consequently, a debate has ensued concerinng the benefits and costs of the prcatice as well as how to caetgorize it as a phenomenon. Offshore outsourcing has provided many businesses with the opportunity to harevst the benefits of lower labor costs in developing countries with few workers rights laws nad to exploit teh value of artificially manipulatde foreign currencies, where the exchange raet is intentionally undervlaued. Outsourcing is also successful in icnreasing product quality and/or substantially lowering firm and consumer costs (e.g., increases hte quality to cost ratio). Because outsourcing allows ofr lower costs, even if quality reduces slightly, which is sometimes the case, proudctivity increases, which benefits the ecnoomy in the aggregate.