IT software Essay
Organizations are constantly trying to find out ways to protect their confidential data while outsourcing IT employees and are trying to maintain their control while only subcontracting non-core tasks. Moreover, it is predicted that organizations will only settle for short-term deals to tackle the flexibility issue and will only outsource a smaller percentage of operations (Singhatiya, 2005).Amid all the discussions of the negative impacts of outsourcing, things which cannot be denied include that low inflation follows as a result of outsourcing, while it even makes the economy of the country thrive and develop and it encourages export by making the products appear cheaper to domestic and foreign customers. Sometimes, it even pushes wage rates upwards and offers more lucrative jobs to workers who were displaced initially because of the outsourcing of employees. This is all a sign of a healthy economy and thus it can be concluded that the positive impacts of outsourcing offsets the negative impacts.
“It is important to note that the total number of IT software and services jobs that have been lost since 2000 when the dot-com bubble burst is 372,000. That is, 10% of all IT software and services jobs in the U. S. have disappeared since 2000, but only 2. 8% of the total IT software and services jobs were lost because of offshore ITO” (Global Insight, 2004, p.
2) The Multinational Corporations When discussing about the negative impact of outsourcing IT employees from USA in the banking sector to low cost countries, must first discuss multinational corporations (MNCs) and the impact of their operations in these countries.Do MNCs really give benefits to low cost countries? Many people may consider MNCs bring great benefits to the countries because they bring in jobs to the locals (Gillis. Roemers & Snodgrass, 1990; King, 1990). The reality and mountain of evidence show that the impact of multinational corporations in low cost countries has been disastrous (King, 1990). Not only in political and economic issues but also in the most important case, which are human right abuse and social conflict?They take away the peace on these lands and replace them with abusiveness and conflicts among local population and competing government officials (The World Bank, 2000).
From accounting point of view and focusing solely on cost, outsourcing may benefit a company that wants to cut cost and increase profit. No wonder firms of all sizes from western countries are flocking the low cost countries seeking to save cost and reaping the benefit of the strength of their dollar in these countries and the absence of any regulations in health care, justice and human rights, and most importantly, the environment (Vernon in King, 1990).Generally, companies outsource their work and obtain the benefit of outsourcing in terms of cheaper cost of operation. Their success was glorified and glamorized by the media and soon, outsourcing becomes market trend.
It becomes like a contagious disease that contracts every industry. Leading by manufacturing industry, it is followed by service industry and today, it is a fever in banking industry. More and more US banks are laying off their employees at home by attrition and move their work overseas or to transfer their employees overseas as the banks move their operation.Some banking employees in Manhattan complained that they are being forced to train foreigners to take over their jobs and once their trainees master the job, they are kicked out of the job. Efficiency, the term used to downgrade government provisions and services also has become one of the fashion words among companies to conduct business with and focusing on least resources (Vernon, 1990). Unfortunately, in most outsourcing scenario, it only last for a short season.
Companies may evolve themselves into transnational or multinational corporations but in the long run, the cost of outsourcing is more than what has been glorified. “Multinationals are Mushrooms” is the title of Raymond Vernon as he discussed about multinationals companies in foreign countries – from their patterns of operation to lines of policy, the antitrust issue, the pressures for political ends and economic ends, to tax issue, and to their unfinished business (King, 1990). History reveals that companies that outsource overseas often go bankrupt within five years of their operation (Vernon, 1990).Even though they are transnational or multinational, despite of their failure in operating overseas, they continuously operating even under solvency abroad because their finance is guaranteed by their government at the expense of the home countries.
Take for example Indonesia’s financial deregulation scenario. Three years after the deregulation of banking industry, the country went bankrupt in 1995. Since 1975, the country has accumulated $45 billion US in debt resulted mostly in foreign direct investment and the case of banking retail has crippled the country’s economy.The bail out package provided by the World Bank and the IMF did not help the country much because 75 percent of the fund received was used to salvage the foreign banks and corporations that went under during the crisis in the country. One percent of the remaining amount was used for safety nets and infrastructure redevelopment due to the religious war, certain percentage was used to bribe government officials to further the interest of the market groups, and the remaining disappear in the process (Vernon, 1990).