Troubles with Outsourcing

Paper Summary:

This paper examines the troubles connected with outsourcing (the business of employing cheaper labor in another place or country) in economic terms. It examines the TCO - the Total Cost of Outsourcing. It considers financial, economic and cultural factors that are all part of the TCO. Outsourcing has come about because American workers work for premium prices, while workers in Mexico, India, and China all work for less. There are certainly hidden costs to this cheaper labor, however, and this work examines these hidden costs.

From the Paper:

"The transition period is quite possibly the most expensive stage of creating the offshore site. It takes from three months to a full year to completely hand the work over to an offshore partner. Company executives have to realize that during this time there will be massive spending instead of savings. Any thought to the contrary is not realistic. There is an intimidating training period associated with the transition period that costs the firm roughly twice as much per offshore employee, and during the training time, the firm is making no money because there is no production."

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