Outsourcing and Corporate Strategy

            Before we can determine if outsourcing is a wise corporate strategy, we must first have a common understanding of the practice and the reasons why some find it concerning. The practice of outsourcing, for the purposes of this paper, can be defined as when a company contracts out a business function to a third party located in another country, usually in the developing world. .
             There is a continued debate in the United States as to whether outsourcing is good for the economy or not. One of the main arguments used by political parties, and citizens who are against outsourcing, is that the practice is unpatriotic, as it sends high-paying jobs overseas and virtually eliminates the middle class. .
             Evidence to confirm this argument are easy to find, for example:.
             1) Business Week quoted a Zogby International poll from 2007 that stated that 71% of Americans believe that outsourcing jobs overseas hurts the U.S. economy, and 62% say the U.S. government should tax or legislate to try to stop the job loss. (http://www.businessweek.com/debateroom/archives/2007/02/outsourcing_wheres_uncle_sam.html).
             2) Research completed in 2010 by the Hackett Group, a global strategic business advisory and operations improvement consulting firm, found that close to 1.1 million jobs in corporate finance, IT, and other business functions were lost at large U.S. and European companies in 2008 and 2009 due to a combination of outsourcing productivity improvements, and lack of economic growth. Over 1.3 million additional jobs will disappear by 2014, the Hackett Group found, with outsourcing becoming a larger factor in the job loss each year. These figures represent annual job loss rates of close to twice those seen from 2000 to 2007. (http://www.thehackettgroup.com/about/alerts/alerts_2010/alert_12022010.jsp).
             However, for many corporations, outsourcing is necessary to compete and remain competitive in today's globalized economy. Thomas Friedman the author of The World is Flat shows how companies in the developing world are becoming part of a global supply chain and argues that soon, corporations will no longer compete against each other.