By 2003, Boeing too was outsourcing 64% of the work involved in building a commercial jet aircraft up from 50% a decade earlier.
Nowadays businesses take advantage of modern communications technology particularly the Internet to outsource service activities to low-cost producers in other nations. Thus US hospitals outsource radiology work to India where images from MRI scans and the like are read at night while US physicians sleep and the results are ready for them in the morning. Many US software companies now use Indian engineers to perform maintenance functions on software designed in US. Due to time difference, Indian engineers can run debugging tests on the software written in US when US engineers sleep, transmitting the corrected code back to the US over secure Internet connections so it is ready for US engineers to work on the following day. Dispersing value creation activities in this way can compress the time and lower the costs required to develop new software programs. Other companies from computer makers to banks are outsourcing customer service functions such as customer call centers, to developing nations where labor is cheaper.
As the global economy slowed after 2000 and corporate profits slumped, many US companies responded by moving while-collar knowledge-based jobs to developing nations where they could be performed for a fraction of the cost.
Companies that outsource skilled jobs clearly benefit from lower costs, enhanced competitiveness in the global economy and greater profits. Consumers benefit from the lower prices made possible by global outsourcing
Source: Charles W L Hill and Arun K Jain, “Outsourcing at the Boeing Company”, International Business, Competing in the Global Marketplace, p. 699 (New Delhi: Tata McGraw-Hill Publishing Company Limited, 2009)
Advances in technology, lower costs and the presence of skilled workers make business sense to outsource to India. For example, in October 2004, Howard Staab, a 53-year-old uninsured self-employed carpenter from North Carolina had surgery to repair a leaking heart valve in India. Mr Staab flew to New Delhi, had the operation and afterward, toured the Taj Mahal, the price of which was bundled with that of the surgery. The cost, including airfare, totaled USD 10,000. If Mr Staab’s surgery had been performed in the US, the cost would have been USD 60,000 and there would have been no visit to the Taj Mahal.
In 2003, some 25,000 US individual tax returns were done in India; in 2005, the number was expected to get closer to 400,000.
Source: Charles W L Hill and Arun K Jain, “The Globalization of Health Care”, International Business, Competing in the Global Marketplace, p. 5 (New Delhi: Tata McGraw-Hill Publishing Company Limited, 2009)
Source: Charles W L Hill and Arun K Jain, “Introduction”, International Business, Competing in the Global Mar-ketplace, p. 7 (New Delhi: Tata McGraw-Hill Publishing Company Limited, 2009)
Source: D. Barboza, “An Unknown Giant Flexes Its Muscles”, The New York Times, Dec 4, 2004, p. B1, B3.
Source: Charles W L Hill and Arun K Jain, “Outsourcing at the Boeing Company”, International Business, Competing in the Global Marketplace, p. 699 (New Delhi: Tata McGraw-Hill Publishing Company Limited, 2009) |
