Student Projects:Outsourcing PPF:Project Description
Contents
Outsourcing: Past, Present and Future
Team
References
Some references have been specifically listed in sections below. We have also collected a list of possible references in the References section on the main page.
Introduction
Policy makers often fall victim to the age old error that they are in a unique situation, fighting forces that have never been wrestled. This is rarely the case, especially for the new economy and its centerpiece known as 'outsourcing'. This new business practice is the result of a technological and communications revolution that was much like that of late 19th Century in the United States. In the past, it resulted in the development of the multi-national corporation. This study analyzes the reasons behind outsourcing, traces its rise through history and into the 21st century, while putting in the context of public policy and its impact on society and innovation.
Our paper will look at outsourcing work to foreign companies, moving operations within a company to other countries, and the importation of foreign workers to work in the US. We will analyze past and current laws and policies that allow and our encourage these transitions of jobs. We will also examine some specific motivations for firms to outsource. Then we will attempt to evaluate how these practices will proceed in the fututre. Finally, we will present policy options, evaluating the costs and benefits of each.
The first part of our paper will look at outsourcing in a historical perspective, comparing it to business developments in the past- helping to understand where outsourcing came from. Much of the history will be derived from the work of business historians, such as the leader Alfred Chandler of Harvard Business School.
Contemporary trends and related policies on outsourcing will be the subject of the second section. Among other things, we will present a case study on the H1-B visa cap issue, which was the center point of outsourcing related debate for a good 2 years and discuss outsourcing from the perspective of the 'outsourcer' and the 'outsourcee'. In light of the recent election and the uncertainty surrounding it, we will discuss outsourcing from a public policy point of view, trying to discern what does outsourcing mean for various sections of the society -- the people, the companies, the government.
The paper will conclude with a discussion on the future of outsourcing -- whether it will sustain itself as a profitable business model in its present form, or will it change drastically, and how publicy policy can and will shape outsourcing in the years to come. Underscoring the difference between structural and cyclical changes in the economy, we will conclude with some recommendations on policy formulation in this area.
Past
Understanding modern outsourcing is not possible without looking at the history of the Modern Business Enterprise and it's rise. In the late 1800's, big business rose to prominence. It was done by developing methods to cut costs. While greater economies of scale, realized through process innovations, brought greater returns, businesses were forced to cut more costs and generate more profits. The demands brought by the evolution of the United State's capitialistic economy, with increasing publicly-held corporations, promoted the exploration of new cost-cutting measures. Modern outsourcing and offshoring are, naturally, part of that master plan. What are the forces that have pushed businesses to leave the United States? Are they similar in the past? A review of the academic literature should shed some light on the modern business movement's motives.
Scope
In this section, we will look at the origins of outsourcing - from its relations and similarity to offshoring. Stuart(and,for now,Andrae) will look int the histroy of outsourcing movements - from the one in manufacturing to possible others scattered throughout colonial history.
Equally Imporant, we [Andrae and whoever else] will examine the changing Political Economy in which American corporations were working. Specifically, the transition of managment's role as statesmen, where concern for profits met concerns for employee and community well-being, to manager as profit-maximizer, concerned only with high stock prices and dividends to satisfy the short-term shareholders.
Policy-wise, we will provide [Kiran,Stuart,David,Diwaker] a broad overview of legislation enacted so far that has led to the present boom in outsourcing - both in the US and in outsourcees like India. [ Eg: 10-year tax holiday for s/w firms in India - enabling co.s to significantly boost their margins]
Other important policies are from America itself. New government regulations and enviormental standards pushed companies into offshoring and outsourcing as well. These forces will also be examined. American business changed greatly because of the government. American companies may not have looked to outsourcing if these policies were never implemented. Therefore, it may be necessary to examine them in some detail.
Sources
- http://www.mapsofindia.com/outsourcing-to-india/index.html
- "The Rise of Big Business: 1860-1920" by Glenn Porter (1992)
- "American Business, 1920-2000: How it Worked" by Thomas K. McCraw (2000)
- "The Emergence of Managerial Capitalism" by Alfred D. Chandler (from Business and Governemtn in America Since 1870, vol., edited by Robert F. Himmelberg; p.31-61 (1994) )
- "The Myth of Global Corporation" by Paul N. Doremus (Princeton: 1998)
- "Governments, Markets and Growth" by John Zysman (1983)
It is likely that some other academic sources will be used on top of these.
Present
Diwaker will study the H1-B visa case, as well as help with other topics in this section. David and Stuart will provide the political context. Kiran will provide an indepth look at outsourcing from the Indian policy-makers' perspective - does outsourcing really help? is there any value-add to the outsourcee's home industry? if so, what policy changes are in the pipeline - with both situations in mind ?
Scope
This part of the study will focus on comtemporary outsourcing: we will try to answer questions like "is outsourcing good or bad?" both from a US perspective as well as from the perspective of an "outsourcee" (like India).
Despite the large losses in US jobs due to outsourcing, its not very clear what the impact on US economy has been -- while the public is opposed to shifting jobs, the companies are finding it increasingly profitable to move operations overseas. We will also analyze the incentives (specifically taxes) that may encourange companies to outsource jobs or move them overseas.
For countries like India, outsourcing has opened up a huge investment market and created millions of jobs. Its not entirely clear what the impact of outsourcing has been in a global context?
Will the WTO (and the 'level-playing-field' implied therein)have any bearing on outsourcing evolving as an actual industry versus mere dumping/destruction of home industries (British Empire vs. Indian kingdoms)?
We will also explore the political outlook on outsourcing -- what are the views and policies of the Republicans and Democrats on this issue, specially in light of the recent elections. Are politicians interested in helping people keep their jobs, or help companies make more profit?
Sources
- http://www.h1base.com/
- Computerworld Coverage: Focus on H1-B Visas
- A blog on IT outsourcing to India
- Various articles on Slashdot and Wired news
- http://heather.cs.ucdavis.edu/itaa.html
- http://www.mackinac.org/article.asp?ID=6819
Future
It has often been seen that historians are terrible at predicting the future. Even after exploring the rise of big business, the forces that have created our current conditions, we are still unable to know what will happen next. History, however, offers us valuable lessons in terms of the mistakes and oversights we can overcome and avoid in future.As policy makers,then, we must attempt to bring the past and present together to shape a future that is free, to a large extent, of the errors of the past while learning from and taking advantage of the trends that have shaped the present.
Scope
In the final section, we will explore the future of outsourcing -- whether it will perish or continue to be a profitable business model? Will it survive in its present form or manifest itself in yet to be discovered ways? How will public policy shape outsourcing? A relevant question that we will try to answer here is whether public policy should indeed tackle outsourcing and , if so, to what extent is this desirable?
We will conclude by presenting options for public policy regarding outsourcing in the future. For each option we will present the advantages and disadvantages of making each change and maintaining the status quo.
