Jensen 1

Zane Jensen
C. Welker
Exploratory Paper
April 9, 2014
Outsourcin! "#e $ntro%uction
Outsourcin is &t#e act o' o(tainin ser)ices 'ro* an external source+ ,-ro.n, 20/. "#is
is .#en a co*pany oes outsi%e o' its o.n o''ices to recei)e #elp 'ro* anot#er co*pany. "#is
outsourcin can take place .it#in a country, or it *ay (e an international (usiness arrane*ent.
0or t#e purpose o' t#is paper, $ .ill 'ocus on o''s#ore outsourcin, *eanin t#at t#e ser)ices are
co*plete% (y 'orein (usinesses.
$ a* intereste% in outsourcin (ecause $ a* )ery intereste% in (eco*in a (usiness *a1or,
an% outsourcin is a process t#at #as (eco*e )ery co**on a*on *any (usinesses ,2eloitte
3isk Journal, par. 1/. $ .ant to (e a(le to not only un%erstan% outsourcin, (ut also to (e a(le to
un%erstan% .#y it is oo%, an% .#y it is (a%. Also, $ %esire to (e a(le to %eci%e, (ase% on *ore
co*plete in'or*ation, on .#et#er or not outsourcin is a (usiness practice t#at $ .oul% e)er use.
Outsourcin is #i#ly contro)ersial. "#ere are se)eral reasons 'or (ot# si%es to 'eel t#e
.ay t#ey %o. 4o*e people are )ery #ea)ily oppose% to o''s#ore outsourcin. "#ey 'eel t#at not
only %o .e i)e a.ay our tec#noloical a%)antaes o)er ot#er countries, (ut t#at .e also #urt
our o.n econo*y an% t#reaten national security ,3o(erts/. On t#e ot#er #an%, t#ere are people
t#at t#ink outsourcin is )ery #elp'ul an% constructi)e 'or (usinesses ,2eloitte 3isk Journal, par.
4/.
$ t#ink t#at t#is issue is )ery *uc# .ort# pursuin. "#ere is a lot o' contro)ersy
surroun%in o''s#ore outsourcin. -ro.n states &Alt#ou# t#e tone o' outsourcin is so'tenin,
outsourcin #as (eco*e a %irty .or%+ ,25/. 6o.e)er, *any (usinesses continue to outsource
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t#eir (usiness processes ,-ro.n, 20/. "ryin to 'in% out *ore a(out #o. outsourcin is
co*plete% an% #o. *any people 'eel a(out it can #elp to try an% un%erstan% t#e contro)ersy.
7o., $ #a)e a 'e. )ery i*portant 8uestions t#at $ .ant to try an% ans.er t#rou#out t#e
process o' co*pletin t#is paper. 0irst, t#ere is t#e o()ious 8uestion, .#ic# is! .#at is
outsourcin, an% .#y use it9 "#is 8uestion see*s )ery si*ple, (ut t#ere are se)eral (ooks t#at
atte*pt to ans.er t#is one 8uestion, an% it %oes inclu%e a lot o' in'or*ation.
"#e next 8uestion is .#et#er outsourcin is a positi)e or neati)e i*pact on A*erican
econo*y an% .ell:(ein. "#is 8uestion is %esine% to #elp *e try to reac# a conclusion, (ut it
also re8uires %ra.in 'ro* *any %i''erent points:o':)ie.. 0ro* t#e ra%ical opinion o' stoppin
all outsourcin, to t#e )ery li(eral approac# o' outsourcin 're8uently an% co**only, t#ere are
*any )ie.:points.
;y 'inal 8uestion is .#et#er or not t#ere are %i''erent )ersions o' outsourcin, an% #o.
%o t#ey %i''er 'ro* one anot#er. $ .ant to kno. i' outsourcin is 1ust a si*ple exc#ane o' a
sinular task, or i' t#ere are se)eral )arious 'or*s o' outsourcin. Are t#ere *ultiple tiers an%
le)els to outsourcin, or is it 1ust )ery si*ple. -ro.n states t#at t#ere are *ultiple le)els, an%
t#at t#ey )ary, %epen%in on t#e le)el o' in)ol)e*ent ,20:21/.
7o., t#at *y purpose an% *y interest #a)e (een esta(lis#e%, it is ti*e to (ein. "#ere
are *any )arious intricacies in)ol)e% in outsourcin. $ .ill (ein to explore t#e )arious
)ie.points an% t#e pros an% cons o' outsourcin, an% atte*pt to un%erstan% t#e purpose an%
e''ecti)eness o' outsourcin. <et=s (ein.
Part 1! "#e -lack -ook o' Outsourcin
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Written (y t.o outsourcin experts, 2oulas -ro.n an% 4cott Wilson, "#e -lack -ook
o' Outsourcin o''ers ui%elines, insi#t, an% inspiration, to #elp ot#ers un%erstan% outsourcin
,19/. "#e %e'inition o' outsourcin is!
Outsourcin! "#e act o' o(tainin ser)ices 'ro* an external source?.
@OutsourcinA occurs .#en an oraniBation turns o)er t#e *anae*ent o'
a particular (usiness process?to a t#ir% party t#at specialiBes in t#at
process. "#e un%erlyin t#eory is t#at @outsourcinA 'ir* can co*plete t#e
process *ore e''iciently, lea)in t#e oriinal 'ir* 'ree to concentrate on its core
co*petency. ,-ro.n an% Wilson, 20/
"#en, t#ey o on to %iscuss t#e t#ree &tiers+ o' outsourcin. "#e t#ree le)els are! tactical
outsourcin, .#ic# is use% 'or a speci'ic issue, strateic outsourcin, .#ic# is use% 'or lon:ter*
relations#ips, an% trans'or*ational outsourcin, .#ic# is ai*e% to.ar% c#anin a (usiness,
t#rou# t#e use o' outsourcin ,-ro.n an% Wilson, 21:2C/. 0inally, -ro.n an% Wilson say
&Outsourcin is (ein reconiBe% in its ri#t'ul place as t#e *ost i*portant (usiness s#i't o' t#e
ne. century?.3econiBin it is ulti*ately 'or t#e co**on oo%, sooner or later, all (usiness
lea%ers .ill eit#er )oluntarily or in)oluntarily (eco*e re8uire% to *anae outsourcin c#anes.+
,>1/.
-ro.n an% Wilson *ake )ery oo% points in 'a)or o' outsourcin. "#e use o'
outsourcin %oes allo. prices to (e lo.er, (ut it also %oes sen% 1o(s o)erseas an% out o' t#e
A*erican econo*y ,-ro.n an% Wilson, >1/. Eit#er .ay, it looks like outsourcin is oin to
stick aroun% 'or a little .#ile loner. $ t#ou#t t#is .as )ery .ell .ritten, an% t#at %espite (iases,
t#e aut#ors %i% a oo% 1o( o' re*ainin close to neutral in presentin t#eir in'or*ation. "#is
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(ook *a%e outsourcin soun% like it #as al.ays (een a positi)e in'luence on t#e A*erican
econo*y.
Part 2! Deste% Outsourcin
Eate Ditasek, a 'or*er e*ployee o' ;icroso't, #as #a% personal experience in t#e 'iel% o'
outsourcin .#ile s#e .orke% 'or ;icroso't. 4#e says t#at s#e .as in c#are o' %e)elopin an
outsourcin stratey ,Ditasek, F/. 4#e explains t#at in an outsourcin relations#ip, (ot# parties
still #a)e t#e sa*e oal, .#ic# is to *ake a pro'it ,Ditasek, 11/. 4o as ti*e .ent on, s#e %eci%e%
to 'ocus #er e''orts on t#e i%ea o' *akin &a (usiness *o%el .#ere (ot# t#e co*pany t#at
outsources an% t#e ser)ice pro)i%er are a(le to *axi*iBe pro'its, toet#er.+ ,Ditasek, 11/.
2espite t#at, &.orkin toet#er 'or *utual success is o'ten a sini'icant c#allene.+ ,Ditasek,
14/. 4e)eral co*panies utiliBe outsourcin, an% it looks like it is not lea)in. Ditasek says t#at
instea% o' atte*ptin to et ri% o' outsourcin, (usinesses nee% to 'ocus on #o. to i*pro)e
outsourcin ,14/. One o' t#e #ar%est parts is ettin (usinesses to .ork )ery .ell toet#er, %ue
to lack o' trust an% a %esire to *axi*iBe ones pro'its ,Ditasek, 14/. 0inally, (ot# outsourcin an%
t#e .orl% are constantly c#anin, an% .e #a)e to (e a(le to a%apt .it# t#ese c#anes, since .e
can not see #o. t#ey .ill turn out ,Ditasek, 1C:1G/.
Ditasek is also #ea)ily 'or t#e use o' outsourcin, since it see*s like it is not oin
any.#ere, anyti*e soon. As people an% (usiness continue to (eco*e closer an% *ore
intert.ine%, t#e use o' outsourcin .ill only increase, it see*s. $ .as 'ascinate% to %isco)er t#at
;icroso't starte% outsourcin a(out 10 years ao, an% t#at t#ere #a)e (een outsourcin
operations 'or a )ery lon ti*e ,Ditasek, 5/. $ .as surprise% t#at, as state% (y Ditasek,
outsourcin is consi%ere% to (e part o' t#e *arketin area o' *anae*ent an% (usiness processes
,Ditasek, F/.
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Part >! "#e O''s#ore Outsourcin o' A*erican Jo(s
2r. Paul Crai 3o(erts .as t#e Assistant 4ecretary o' t#e "reasury %urin t#e 3eaan
a%*inistration. 3o(erts 'eels t#at no one .#o is un(iase% #as release% anyt#in rear%in t#e
#ar*'ul e''ects o' outsourcin ,par. 2/. On 1o(s an% A*erican econo*y an% #o. it is a''ecte%,
3o(erts states!
"#e result is a lose:lose situation 'or A*erican e*ployees, A*erican (usinesses,
an% t#e A*erican o)ern*ent. Outsourcin #as (rou#t a(out recor%
une*ploy*ent in enineerin 'iel%s an% a *a1or %rop in uni)ersity
enroll*ents in tec#nical an% scienti'ic %isciplines. E)en *any o' t#e re*ainin
1o(s are (ein 'ille%?. A*erican e*ployees are %isc#are% a'ter (ein 'orce% to
train t#eir 'orein replace*ents?.$n 'act, stu%ies s#o.?co*panies #a)e
(een consistently outco*petin t#eir H4 counter parts, e)en in t#e H4
*arkets. ,par. 11:12/.
On anot#er 'ront, 3o(erts clai*s t#at &nation security i*plications o' outsourcin #a)e
(een larely inore%.+ ,par 1>/. 6e clai*s t#at as A*erica continues to outsource 1o(s, .e lose
our tec#noloical an% econo*ic a%)antaes t#at .e #a)e, i)in t#e* a.ay to t#ese countries
t#at .e outsource 1o(s to ,3o(erts, par. 1>/. 0inally, 3o(erts %iscre%its reports o' outsourcin
(ein a positi)e in'luence as &?@HAnreasona(ly opti*istic 'orecast@sA (ase% on 'aulty loic an%
a poor un%erstan% o' tec#noloy an% stratey.+ ,par. 1C/.
$ en1oye% 'in%in an article t#at .as aainst outsourcin, as *ost people 1ust accept
outsourcin as a nor*al part o' #o. (usiness .orks. $ ne)er t#ou#t o' outsourcin as a security
t#reat (e'ore $ rea% t#is, (ut it %oes *ake sense #o. t#is coul% lea% to t#e loss o' tec#noloical
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a%)ances. 6o.e)er, $ %on=t (elie)e t#at &Only 'ools .ill continue clinin to t#e pre*ise t#at
outsourcin is oo% 'or A*erica.+ ,3o(erts, par. 1G/.
Part 4! ;anain Outsourcin 3isks at t#e Early 4taes
$n t#e article, &;anain Outsourcin 3isks at t#e Early 4tae,+ .ritten (y an e*ployee
'or t#e Deloitte Risk Journal, t#e topic o' outsourcin 1o(s is %iscusse%. "#is essay 'ocuses
#ea)ily on t#e (ene'its an% possi(le risks o' outsourcin 1o(s to ot#er (usinesses, inclu%in
o''s#ore outsourcin. "#e *a1or 'ocus is on risk *anae*ent, as sai% in an inter)ie. .it# risk
*anaer, 2a)i% Zec#nic#! &"#ese risks, i' not *anae% e''ecti)ely, can lea% to )alue
leakae?.+,2eloitte 3isk Journal, par. 2/. Anot#er expert, A1ay -olina, state% &"akin a
li'ecycle approac# to outsourcin? also can #elp oraniBations not only ac#ie)e t#eir
outsourcin oals (ut also *ore e''ecti)ely *anae onoin relations#ips.+ ,2eloitte 3isk
Journal, par. 4/. "#en, t#ere are C eneral steps t#at are a%)ise% 'or a (usiness to take .#en
outsourcin. &"#e 'ollo.in 'i)e:p#ase approac# can ser)e as a use'ul ui%e.?+ ,2eloitte 3isk
Journal, par. G/ "#ese steps co)er se)eral parts o' t#e .#ole process. &P#ase 1! 2e'ine stratey
an% operatin *o%el?P#ase C! ;anae onoin operations+ ,2eloitte 3isk Journal, par. F:14/
0inally, it is state% t#at outsourcin is co**on an% s#oul% not (e a)oi%e%, (ut *anae% .it#
care. &As outsourcin #as (eco*e an increasinly stan%ar% (usiness practice? @itA presents ne.
risks an% c#allenes.+ ,2eloitte 3isk Journal, par. 1/.
"#is article #ea)ily aree% .it# (ot# o' t#e (ooks t#at $ #a% rea%. "#ey ackno.le%e t#at
outsourcin is use% #ea)ily, (ut t#ey t#ink t#at is increasinly nor*al, an% t#at it is )ery
(ene'icial, i' *anae% properly. ,2eloitte 3isk Journal, par. 1:2/. "#is article inclu%e% *ultiple
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inter)ie.s .it# *ultiple experts, s#o.in t#at outsourcin %oes create so*e 1o(s, e)en i' t#at is
insini'icant co*pare% to t#e nu*(er o' 1o(s s#ippe% a.ay o)er seas.
Part C! En%in Point
Outsourcin is a topic .it# *any %i''erent #ea%s, an% eac# #ea% #as *ultiple .ays to (e
interprete%. Iou can )ie. it as a loss o' a%)ance*ents in tec#noloy ,3o(erts/ or as a .ay to
.ork toet#er .it# 'orein nations. 4o*e 1o(s are create% (y it, .#ile *any are lost to
outsourcin. Outsourcin %oes lose a lot o' 1o(s to 'orein *arkets, (ut it %oes increase
pro%ucti)ity, in t#e sense o' *ini*u* cost an% *axi*u* pro'it ,-ro.n an% Wilson, >1/.
$ stan% in 'a)or o' outsourcin. $ (elie)e t#at t#ere *ay (e so*e losses %ue to t#e use o'
outsourcin, suc# as loss o' 1o(s, an%, in so*e areas, loss o' 8uality in t#e pro%uct. $ %o
un%erstan% t#e aru*ents t#at 3o(erts *a%e a(out #o. outsourcin #urts t#e A*erican
econo*y (y i)in a.ay 1o(s an% *oney, (ut $ still 'a)or outsourcin. $ t#ink t#at it is a
necessary e)il in *o%ern %ay A*erica. $' .e #a)e *ore *oney to spen% a'ter (uyin so*et#in,
t#en .e continue to (uy an% put *ore *oney into t#e econo*y ,-ro.n an% Wilson, >0:>1/.
"#e (ooks (ot# pus#e% *e in 'a)or o' outsourcin. "#e 'irst one, "#e -lack -ook o'
Outsourcin, (y -ro.n an% Wilson, #ea)ily co)ere% t#e use o' outsourcin, an% .#at
outsourcin is at its *ost (asic le)el. "#ey are )ery oo% at keepin t#e ter*inoloy si*ple to
un%erstan%, (ut t#ey also con)ey .#at is *eant (y outsourcin )ery .ell. $ 'eel t#at t#ey .ere
(iase% to.ar% outsourcin, (ut t#ey .ere )ery oo% at tryin to re*ain neutral t#rou#out t#e
no)el, in an atte*pt to si*ply in'or*, an% not 1ust try to et e)eryone to listen only to t#eir si%e
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o' t#e aru*ent. "#ey e)en *ention t#e possi(le %ra.(acks o' outsourcin as it co*pares to
ot#er possi(le routes to sol)in si*ilar issues ,-ro.n an% Wilson, 2G:2F/.
Ditasek also %i% a reat 1o( o' presentin #er in'or*ation, e)en i' s#e .as #ea)ily (iase%
'or outsourcin, seein as #o. s#e #a% #el% se)eral 1o(s t#at %ealt .it# outsourcin ,Ditasek, F/.
4#e presente% so*e o' t#e statistics 'or outsourcin, an% s#e also explaine% #o. outsourcin
nee%s to (e ai*e% to.ar% (ene'ittin (ot# parties, an% not 1ust one o)er t#e ot#er.
$ #a)e %eci%e% t#at $ t#ink outsourcin is a oo% t#in. $ (elie)e t#at outsourcin
increases pro%ucti)ity, .#ic# *eans i)in custo*ers lo.er prices, an% *ore pro'it to t#e
(usiness. Also, it encouraes international (usiness, .#ic# is so*et#in t#at .e as a race nee% to
continue i*pro)in upon, since .e are all stuck on t#is planet toet#er. $ also t#ink t#at
outsourcin %oes take 1o(s out o' t#e A*erican *arket, (ut i' t#ese 1o(s .ere still #ere, t#en t#e
prices o' oo%s .oul% 1u*p, an% people .oul% not #a)e as *uc# *oney to spen% on t#e t#ins
t#ey .ant ,-ro.n an% Wilson, 29:>1/.
0inally, $ t#ink t#at outsourcin is still ro.in, an% t#at (usiness lea%ers nee% to *onitor
it an% try to *ake sure t#at it stays (ene'icial, an% %oes not #ar* our econo*y. As esta(lis#e% in
t#e Deloitte Risk Journal! &"#ese risks, i' not *anae% e''ecti)ely, can lea% to )alue
leakae?.+, par. 2/. We nee% to *ake sure t#at .e %o not co*pro*ise our o.n econo*y .it#
t#e use o' 'orein nations= la(or.
Jensen 9
Works Cite%
-ro.n, 2oulas an% Wilson, 4cott. &"#e -lack -ook o' Outsourcin! 6o. to ;anae t#e
C#anes, C#allenes, an% Opportunities.+ 7e. Iork! Wiley, 200C. Print.
&;anain Outsourcin 3isks at t#e Early 4taes.+ > ;arc# 2014. 2eloitte 3isk Journal. We(.
1C ;arc# 2014.
3o(erts, Paul Crai. &"#e O''s#ore Outsourcin o' A*erican Jo(s! A Jreater "#reat "#an
"erroris*.+ 201>. Jlo(al 3esearc#. We(. 1G ;arc# 2014.
Ditasek, Eate. &Deste% Outsourcin! 0i)e 3ules t#at .ill "rans'or* Outsourcin.+ 7e. Iork!
Palra)e, 2010. Print.