Outsourcing

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally,[1][2] and sometimes involves transferring employees and assets from one firm to another.

The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981.[3][4][5] The concept, which The Economist says has "made its presence felt since the time of the Second World War",[6] often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).

The practice of handing over control of public services to private enterprises, even if on a short-term limited basis,[7] may also be described as "outsourcing".[8]

Outsourcing includes both foreign and domestic contracting,[9] and sometimes includes offshoring (relocating a business function to a distant country, for instance Poland or Ukraine)[10] or nearshoring (transferring a business process to a nearby country).

Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed,[11] involving terms such as reshoring, inshoring, and insourcing.

Terminology

• Offshoring is moving the work to a distant country. If the distant workplace is a foreign subsidiary/owned by the company, then the offshore operation is a captive,[12] sometimes referred to as in-house offshore.[13]
• Offshore outsourcing is the practice of hiring an external organization to perform some business functions ("Outsourcing") in a far-off country other than the one where the products or services are actually performed, developed or manufactured ("Offshore").[14]
• Insourcing entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration.
• Nearshoring refers to outsource to a nearby country.
• Farmshoring refers to outsourcing to companies in more rural locations within the same country.[15]
• Homeshoring (also known as Homesourcing) is a form of IT-enabled "transfer of service industry employment from offices to home-based ... with appropriate telephone and Internet facilities".[16][17] These telecommuting positions may be customer-facing or back-office,[18] and the workers may be employees or independent contractors.
• In-housing refers to hiring employees.[19][20]
• An Intermediary is when a business provides a contract service to another organization while contracting out that same service.[21][22]

Acronyms

Some of the acronyms related to BPO (Business Process Outsourcing) are:

• EPO - Engineering Process Outsourcing
• ITO - Information Technology Outsourcing
• KPO - Knowledge process outsourcing
• LPO - Legal process outsourcing[23]
• RPO - Recruitment process outsourcing
• HRO - Human Resource Outsourcing

Overview

Motivations

Global labor arbitrage can provide major financial savings from lower international labor rates, which could be a major motivation for offshoring. Historically, there has been a strong focus on cost optimization and service improvement; however, there is now greater prioritization towards revenue generation.[24] Cost savings from economies of scale and specialization can also motivate outsourcing, but a report by Forrester Research in 2015 observed that "cost-cutting is no longer the top goal of outsourcing".[25] Forrester's research among 13,822 global and technology decision-makers identified the following main objectives:

• Revenue growth (75% of respondents stated this was a high or critical priority)
• Improving the customer experience (75%)
• Cost reduction (64%)
• Market differentiation (50%)
• Regulatory compliance (46%).[25]

Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process".[26] Details of managing DuPont's CIO Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Andersen Consulting were outsourced, thus avoiding "inventing a process if we'd done it in-house". A term subsequently developed to describe this is midsourcing.[27][28][29]

Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses,[30] and risk.

"Do what you do best and outsource the rest" has become an internationally recognized business tagline first "coined and developed"[31] in the 1990s by management consultant Peter Drucker. The slogan was primarily used to advocate outsourcing as a viable business strategy. Drucker began explaining the concept of "Outsourcing" as early as 1989 in his Wall Street Journal article entitled "Sell the Mailroom".[32]

Sometimes the effect of what looks like outsourcing from one side and insourcing from the other side can be unexpected: The New York Times reported in 2001 that "6.4 million Americans .. worked for foreign companies as of 2001, [but] more jobs are being outsourced than" [the reverse].[33]

Agreements

Two organizations may enter into a contractual agreement involving an exchange of services, expertise, and payments. Outsourcing is said to help firms to perform well in their core competencies, fuel innovation, and mitigate a shortage of skill or expertise in the areas where they want to outsource.[34]

History

20th century

Following the adding of management layers in the 1950s and 1960s to support expansion for the sake of economy of scale, corporations found that agility and added profits could be obtained by focusing on core strengths; the 1970s and 1980s were the beginnings of what later was named outsourcing.[35] Kodak's 1989 "outsourcing most of its information technology systems"[36] was followed by others during the 1990s.[36]

In 2013, the International Association of Outsourcing Professionals gave recognition to Electronic Data Systems Corporation's Morton H. Meyerson[37] who, in 1967, proposed the business model that eventually became known as outsourcing.[38]

IT-enabled services offshore outsourcing

Growth of offshoring of IT-enabled services, although not universally accepted,[39][40] both to subsidiaries and to outside companies (offshore outsourcing) is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecommunication and Internet expansion of the late 1990s.[41] Services making use of low-cost countries included

• back-office and administrative functions, such as finance and accounting, HR, and legal
• call centers and other customer-facing departments, such as marketing and sales services
• IT infrastructure and application development
• knowledge services, including engineering support,[42] product design, research and development, and analytics.

Early 21st century

In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or offshore outsourcing. Other options subsequently emerged: nearshoring, crowdsourcing, multisourcing,[43][44] strategic alliances/strategic partnerships, strategic outsourcing.[45]

From Drucker's perspective, a company should only seek to subcontract in those areas in which it demonstrated no special ability.[46] The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider's knowledge and economies of scale to improve performance and achieve the service needed.[47]

In 2009, by way of recognition, Peter Drucker posthumously received a significant honor when he was inducted into the Outsourcing Hall of Fame for his outstanding work in the field.[46]

Limitations due to growth

Inflation, high domestic interest rates, and economic growth pushed India's IT salaries 10 - 15%, making some jobs relatively "too" expensive, compared to other offshoring destinations. Areas for advancing within the value chain included research and development, equity analysis, tax-return processing, radiological analysis, and medical transcription.

Offshore alternatives

Japanese companies outsourced to China, particularly to formerly Japanese-occupied cities.[48] German companies have outsourced to Eastern European countries with German-language affiliation, such as Poland, Ukraine and Romania.[49] French companies outsource to North Africa for similar reasons.

For Australian IT companies, Indonesia is one of the major choice of offshoring destination. Near-shore location, common time zone and adequate IT work force are the reasons for offshoring IT services to Indonesia.

Growth of white-collar outsourcing

Although offshoring initially focused on manufacturing, white-collar offshoring/outsourcing has grown rapidly since the early 21st century. The digital workforce of countries like India and China are only paid a fraction of what would be minimum wage in the US. On average, software engineers are getting paid between 250,000 and 1,500,000 rupees (US$4,000 to US$23,000) in India as opposed to $40,000–$100,000 in countries such as the US and Canada.[50] Closer to the US, Costa Rica has become a big source for the advantages of a highly educated labor force, a large bilingual population, stable democratic government, and similar time zones with the United States. It takes only a few hours to travel between Costa Rica and the US. Companies such as Intel, Procter & Gamble, HP, Gensler, Amazon and Bank of America have big operations in Costa Rica.[51]

Unlike outsourced manufacturing, outsourced white collar workers can choose their working hours, and for which companies to work. Clients benefit from telecommuting, reduced office space, management salary, and employee benefits as these individuals are contracted workers.[52]

However, ending a government oursourcing arrangement has its difficulties too.[53]

Reasons for outsourcing

While U.S. companies do not outsource to reduce high top level executive or managerial costs,[54] they primarily outsource to reduce peripheral and "non-core" business expenses.[55] Further reasons are higher taxes, high energy costs, and excessive government regulation or mandates.

Mandated benefits like social security, Medicare, and safety protection (OSHA regulations) are also motivators.[56] By contrast, executive pay in the United States in 2007, which could exceed 400 times more than average workers — a gap 20 times bigger than it was in 1965[54] is not a factor.[57]

Other reasons include reducing and controlling operating costs, improving company focus, gaining access to world-class capabilities, tax credits,[58] freeing internal resources for other purposes, streamlining or increasing efficiency for time-consuming functions, and maximizing use of external resources. For small businesses, contracting/subcontracting/"outsourcing" might be done to improve work-life balance[59]

Outsourcing models

There are many outsourcing models, with variations[60] by country,[61] year[62][63] and industry.[64][65]

Another approach is to differentiate between tactical and strategic outsourcing models. Tactical models include

• staff augmentation
• project-based
• to gain expertise not available in-house.

Strategic consultancy includes for Business process improvement.[66]

Innovation outsourcing

When offshore outsourcing knowledge work, firms heavily rely on the availability of technical personnel at offshore locations. One of the challenges in offshoring engineering innovation is a reduction in quality.[67]

Co-sourcing

Co-sourcing is a hybrid of internal staff supplemented by an external service provider.[68][69] Co-sourcing can minimize sourcing risks, increase transparency, clarity and lend toward better control than fully outsourced.[70]

Co-sourcing services can supplement internal audit staff with specialized skills such as information risk management or integrity services, or help during peak periods, or similarly for other areas such as software development or human resources.

Identity management co-sourcing

Identity management co-sourcing is when on-site hardware[71][72] interacts with outside identity services.

This contrasts with an "all in-the-cloud" service scenario, where the identity service is built, hosted and operated by the service provider in an externally hosted, cloud computing infrastructure.

Offshore Software R&D Co-sourcing

Offshore Software R&D is the provision of software development services by a supplier (whether external or internal) located in a different country from the one where the software will be used. The global software R&D services market, as contrasted to Information Technology Outsourcing (ITO) and BPO, is rather young and currently is at a relatively early stage of development.[73]

Countries involved in outsourced software R&D

Canada, India, Ireland, and Israel were the four leading countries as of 2003.[73] Although many countries have participated in the Offshore outsourcing of software development, their involvement in co-sourced and outsourced Research & Development (R&D) was somewhat limited. Canada, the second largest by 2009, had 21%[74]

As of 2018, the top three were deemed by one "research-based policy analysis and commentary from leading economists" as China, India and Israel."[75]

Gartner Group adds in Russia, but does not make clear whether this is pure R&D or run-of-the-mill IT outsourcing.[76]

Usability issues in offshore development

The main driver for offshoring development work has been the greater availability of developers at a lower cost than in the home country. However, the rise in offshore development has taken place in parallel with an increased awareness of the importance of usability, and the user experience, in software. Outsourced development poses special problems for development, i.e. the more formal, contractual relationship between the supplier and client, and geographical separation place greater distance between the developers and users, which makes it harder to reflect the users' needs in the final product. This problem is exacerbated if the development is offshore. Further complications arise from cultural differences, which apply even if the development is carried out by an in-house offshore team.[77]

Historically offshore development concentrated on back office functions but, as offshoring has grown, a wider range of applications have been developed. Offshore suppliers have had to respond to the commercial pressures arising from usability issues by building up their usability expertise. Indeed, this problem has presented an attractive opportunity to some suppliers to move up market and offer higher value services.[78][79][80]

Legal issues

Offshore Software R&D means that company A turns over responsibility, in whole or in part, of an in-house software development to company B whose location is outside of company A's national jurisdiction. Maximizing the economic value of an offshore software development asset critically depends on understanding how best to use the available forms of legal regulations to protect intellectual rights. If the vendor cannot be trusted to protect trade secrets, then the risks of an offshoring software development may outweigh its potential benefits. Hence, it is critical to review the intellectual property policy of the potential offshoring supplier. The intellectual property protection policy of an offshore software development company must be reflected in these crucial documents: General Agreement; Non-Disclosure Agreement; Employee Confidentiality Contract.[81]

2000-2012 R&D

As forecast in 2003,[82] R&D is outsourced. Ownership of intellectual property by the outsourcing company, despite outside development, was the goal. To defend against tax-motivated cost-shifting, the US government passed regulations in 2006 to make outsourcing research harder.[83] Despite many R&D contracts given to Indian universities and labs, only some research solutions were patented.[84]

While Pfizer moved some of its R&D from the UK to India,[85] a Forbes article suggested that it is increasingly more dangerous to offshore IP sensitive projects to India, because of India's continued ignorance of patent regulations.[86] In turn, companies such as Pfizer and Novartis, have lost rights to sell many of their cancer medications in India because of lack of IP protection.

Future trends

Top it outsourcing destinations

A 2018 "The Future of Outsourcing" report began with "The future of outsourcing is digital."[87] The ""Do what you do best and outsource the rest" approach means that "integration with retained systems"[87] is the new transition challenge - people training still exists, but is merely an "also."

There is more complexity than before, especially when the outside company may be an integrator.[87]

While the number of technically skilled labor grows in India, Indian offshore companies are increasingly tapping into the skilled labor already available in Eastern Europe (countries like Poland and Ukraine)[88] to better address the needs of the Western European R&D market.[89]

Changed government outsourcing focus

Forbes considers the US Presidential election of 2016 "the most disruptive change agent for the outsourcing industry",[90] especially the renewed "invest in America" goalhighlighted in campaigning.

Furthermore, there are growing legal requirements for data protection, where obligations and implementation details must be understood by both sides. e.g. NYS-mandated cybersecurity standards affecting "all institutions authorized ... to operate in New York..."</ref> This includes dealing with customer rights.[91]

Implications

Performance measurement

Focusing on software quality metrics is a good way to maintain track of how well a project is performing.

Management processes

Globalization and complex supply chains, along with greater physical distance between higher management and the production-floor employees often requires a change in management methodologies, as inspection and feedback may not be as direct and frequent as in internal processes. This often requires the assimilation of new communication methods such as voice over IP, instant messaging, and Issue tracking systems, new time management methods such as time tracking software, and new cost- and schedule-assessment tools such as cost estimation software. Outsourcing often represents a managerial challenge, as outsourcing drivers and goals need to be continuously aligned with contractual and managerial aspects of the business relationship.[92] For example, strategic outsourcing initiatives that resemble corporate partnerships may rely less on strict contractual regulations and their enforcement (e.g., penalties and service-level-agreements) but rather focus on developing mutual trust and a shared strategic vision.[93][94]

Communications and customer service

In the area of call center outsourcing, especially when combined with offshoring,[95] agents may speak with different linguistic features such as accents, word use and phraseology, which may impede comprehension.[96][97][98][99]

Governance

In 1979, Nobel laureate Oliver E. Williamson wrote that the governance structure is the "framework within which the integrity of a transaction is decided." Adding further that "because contracts are varied and complex, governance structures vary with the nature of the transaction."[100] University of Tennessee researchers have been studying complex outsourcing relationships since 2003. Emerging thinking regarding strategic outsourcing is focusing on creating a contract structure in which the parties have a vested interest in managing what are often highly complex business arrangements in a more collaborative, aligned, flexible, and credible way.[101][102]

Security

Reduced security, sometimes related to lower loyalty[103] may occur, even when "outsourced" staff change their legal status but not their desk. While security and compliance issues are supposed to be addressed through the contract between the client and the suppliers, fraud cases have been reported.

In April 2005, a high-profile case involved the theft of $350,000 from four Citibank customers when call-center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.[104]

Information Technology

Richard Baldwin's 2006 The Great Unbundling work was followed in 2012 by Globalization's Second Acceleration (the Second Unbundling) and in 2016 by The Great Convergence: Information Technology and the New Globalization.[105] It is here, rather than in manufacturing, that the bits economy can advance in ways that the economy of atoms and things can't: an early 1990s Newsweek had a half page cartoon showing someone who had just ordered a pizza online, and was seeking help to download it.

Step-in rights

If both sides have a contract clause permitting step-in rights,[106] then there is a right, though not an obligation,[107] to take over a task that is not going well, or even the entire project.

Issues and reversals

Demonstrating need to ensure outsourcing gains are realised and losses avoided at a summit in London in 2009

A number of outsourcings and offshorings that were deemed failures[108][109][67] led to reversals[110][111] signaled by use of terms such as Insourcing and reshoring. The New York Times reported in 2017 that IBM "plans to hire 25,000 more workers in the United States over the next four years," overlapping India-based Infosys's "10,000 workers in the United States over the next two years."[112] A clue to a tipping point having been reached was a short essay titled "Maybe You Shouldn’t Outsource Everything After All"[113] and the longer "That Job Sent to India May Now Go to Indiana."

Among problems encountered were supply-and-demand induced raises in salaries and lost benefits of similar-time-zone. Other issues were differences in language and culture.[112][97] Another reason for a decrease in outsourcing is that many jobs that were subcontracted abroad have been replaced by technological advances.[114]

According to a 2005 Deloitte Consulting survey, a quarter of the companies which had outsourced tasks reversed their strategy.[114]

These reversals, however, did not undo the damage. New factories often:

• were in different locations
• needed different skill sets
• used more automation.[115]

Public opinion in the US and other Western powers opposing outsourcing was particularly strengthened by the drastic increase in unemployment as a result of the 2007–2008 financial crisis. From 2000 to 2010, the US experienced a net loss of 687,000 jobs due to outsourcing, primarily in the computers and electronics sector. Public disenchantment with outsourcing has not only stirred political responses, as seen in the 2012 US presidential campaigns, but it has also made companies more reluctant to outsource or offshore jobs.[114]

A counterswing depicted by a 2016 Deloitte survey suggested that companies are no longer reluctant to outsource.[116] Deloitte's survey identified three trends:

• Companies are broadening their approach to outsourcing as they begin to view it as more than a simple cost-cutting play
• Organizations are "redefining the ways they enter into outsourcing relationships and manage the ensuing risks".
• Organizations are changing the way they are managing their relationships with outsourcing providers to "maximize the value of those relationships".

Insourcing

Insourcing is the process of reversing an outsourcing, possibly using help from those not currently part of the inhouse staff.[117][118][119]

Outsourcing has gone through many iterations and reinventions, and some outsourcing contracts have been partially or fully reversed. Often the reason is to maintain control of critical production or competencies, and insourcing is used to reduce costs of taxes, labor and transportation.[120]

Regional insourcing, a related term, is when a company assigns work to a subsidiary that is within the same country. This differs from onshoring and reshoring: these may be either inside or outside the company.

Regional insourcing

Regional insourcing is a process in which a company establishes satellite locations for specific entities of their business, making use of advantages one state may have over another[121][122] This concept focuses on the delegating or reassigning of procedures, functions, or jobs from production within a business in one location to another internal entity that specializes in that operation. This allows companies to streamline production, boost competency, and increase their bottom line.

This competitive strategy applies the classical argument of Adam Smith, which posits that two nations would benefit more from one another by trading the goods that they are more proficient at manufacturing.[123][124]

Net effect on jobs

To those who are concerned that nations may be losing a net number of jobs due to outsourcing, some[125] point out that insourcing also occurs. A 2004 study[126] in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. The New York Times disagreed, and wrote that free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.[127]

The impact of offshore outsourcing, according to two estimates published by The Economist showed unequal effect during the period studied 2004 to 2015, ranging from 150,000 to as high as 300,000 jobs lost per year.[128]

In 2010, a group of manufacturers started the Reshoring Initiative, focusing on bringing manufacturing jobs for American companies back to the country.[129] Their data indicated that 140,000 American jobs were lost in 2003 due to offshoring. Eleven years later in 2014, the United States recovered 10,000 of those offshored positions; this marked the highest net gain in 20 years.[130] More than 90% of the jobs that American companies "offshored" and outsourced manufacturing to low cost countries such as China, Malaysia and Vietnam did not return.[129][130]

Insourcing crossbreeds

The fluctuation of prefixes and names give rise to many more "cross-breeds" of insourcing. For example, "offshore insourcing" is "when companies set up their own "captive" process centers overseas, sometimes called a Captive Service,[131] taking advantage of their cheaper surroundings while maintaining control of their back-office work and business processes."[132] "Remote insourcing" refers to hiring developers to work in-house from virtual (remote) facilities.[133]

In the United States

A 2012 series of articles in Atlantic Magazine[134][135][136][137] highlighted a turning of the tide for parts of the USA's manufacturing industry. Specific causes identified include rising third-world wages, recognition of hidden off-shoring costs, innovations in design/manufacture/assembly/time-to-market, increasing fuel and transportation costs, falling energy costs in the US, increasing US labor productivity, and union flexibility. Hiring at GE's giant Appliance Park in Louisville increased 90% during 2012.

Standpoint of labor

From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and is reflective of the general process of globalization and economic polarization.[138]

• Low-skilled work: Outsourced low-skilled work to contractors who tend to employ migrant labor[139] is causing a revival of radical trade union activity. In the UK, major hospitals, universities,[140] ministries and corporations are being pressured; outsourced workers often earn minimum wage and lack sick pay, annual leave, pensions and other entitlements enjoyed by directly employed staff at the same workplaces.[141]
• In-housing: In January 2020, Tim Orchard, the CEO of Imperial College Healthcare Trust stated that the in-housing of over 1,000 Sodexo cleaners, caterers and porters across five NHS hospitals in London "will create additional cost pressures next year but we are confident that there are also benefits to unlock, arising from better team working, more co-ordinated planning and improved quality."[142]
• USA base: On June 26, 2009, Jeff Immelt, the CEO of General Electric, called for the United States to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much and can no longer rely on consumer spending to drive demand.[143]

Standpoint of government

Western governments may attempt to compensate workers affected by outsourcing through various forms of legislation. In Europe, the Acquired Rights Directive attempts to address the issue. The Directive is implemented differently in different nations. In the United States, the Trade Adjustment Assistance Act is meant to provide compensation for workers directly affected by international trade agreements. Whether or not these policies provide the security and fair compensation they promise is debatable.

Government response

In response to the recession, President Obama launched the SelectUSA program in 2011. In January 2012, President Obama Issued a Call to Action to Invest in America at the White House "Insourcing American Jobs" Forum.[144] Obama met with representatives of companies such as Otis Elevator, Apple, DuPont, Master Lock, all of which had recently brought jobs back or made significant investments in the United States.

Policy-making strategy

A main feature of outsourcing influencing policy-making is the unpredictability it generates regarding the future of any particular sector or skill-group. The uncertainty of future conditions influences governance approaches to different aspects of long-term policies.

In particular, distinction is needed between

• cyclical unemployment – for which pump it up solutions have worked in the past, and
• structural unemployment – when "businesses and industries that employed them no longer exist, and their skills no longer have the value they once did."[115]

Competitiveness

A governance that attempts adapting to the changing environment will facilitate growth and a stable transition to new economic structures[145] until the economic structures become detrimental to the social, political and cultural structures.

Automation increases output and allows for reduced cost per item. When these changes are not well synronized, unemployment or underemployment is a likely result. When transportation costs remain unchanged, the negative effect may be permanent;[115] jobs in protected sectors may no longer exist.[146]

USA outsourcing's effect on Mexico, studies suggest, is that for every 10% increase in US wages, north Mexico cities along the border experienced wage rises of 2.5%, about 0.69% higher than in inner cities.[147]

By contrast, higher rates of saving and investment in Asian countries, along with rising levels of education, studies suggest, fueled the ‘Asian miracle’ rather than improvements in productivity and industrial efficiency. There was also an increase in patenting and research and development expenditures.[148]

Industrial policy

Outsourcing results from an internationalization of labor markets as more tasks become tradable. According to leading economist Greg Mankiw, the labour market functions under the same forces as the market of goods, with the underlying implication that the greater the number of tasks available to being moved, the better for efficiency under the gains from trade. With technological progress, more tasks can be offshored at different stages of the overall corporate process.[14]

The tradeoffs are not always balanced, and a 2004 viewer of the situation said "the total number of jobs realized in the United States from insourcing is far less than those lost through outsourcing."[149]

Environmental policy

Import competition has caused a de facto ‘race-to-the-bottom’ where countries lower environmental regulations to secure a competitive edge for their industries relative to other countries.

As Mexico competes with China over Canadian and American markets, its national Commission for Environmental Cooperation has not been active in enacting or enforcing regulations to prevent environmental damage from increasingly industrialized Export Processing Zones. Similarly, since the signing of NAFTA, heavy industries have increasingly moved to the US which has a comparative advantage due to its abundant presence of capital and well-developed technology. A further example of environmental de-regulation with the objective of protecting trade incentives have been the numerous exemptions to carbon taxes in European countries during the 1990s.

Although outsourcing can influence environmental de-regulatory trends, the added cost of preventing pollution does not majorly determine trade flows or industrialization.[150]

Success stories

Companies such as ET Water Systems (now a Jain Irrigation Systems company),[151] GE Appliances and Caterpillar found that with the increase of labor costs in Japan and China, the cost of shipping and custom fees, it cost only about 10% more to manufacture in America.[114] Advances in technology and automation such as 3D printing technologies[152] have made bringing manufacturing back to the United States, both cost effective and possible. Adidas, for example, plans producing highly customized shoes with 3D printers in the U.S.[153]

Globalization and socio-economic implications

Industrialization

Outsourcing has contributed to further levelling of global inequalities as it has led to general trends of industrialization in the Global South and deindustrialization in the Global North.

Not all manufacturing should return to the U.S.[154] The rise of the middle class in China, India and other countries has created markets for the products made in those countries. Just as the U.S. has a "Made in U.S.A." program, other countries support products made in their countries as well. Localization, the process of manufacturing products for the local market, is an approach to keeping some manufacturing offshore and bringing some of it back. Besides the cost savings of manufacturing closer to the market, the lead time for adapting to changes in the market is faster.

The rise in industrial efficiency which characterized development in developed countries has occurred as a result of labor-saving technological improvements. Although these improvements do not directly reduce employment levels but rather increase output per unit of work, they can indirectly diminish the amount of labor required for fixed levels of output.[155]

Growth and income

It has been suggested that "workers require more education and different skills, working with software rather than drill presses" rather than rely on limited growth labor requirements for non-tradable services.[115]

By location

United States

Protection of some data involved in outsourcing, such as about patients (HIPAA) is one of the few federal protections.[156]

"Outsourcing" is a continuing political issue in the United States, having been conflated with offshoring during the 2004 U.S. presidential election. The political debate centered on outsourcing's consequences for the domestic U.S. workforce. Democratic U.S. presidential candidate John Kerry called U.S. firms that outsource jobs abroad or that incorporate overseas in tax havens to avoid paying their "fair share" of U.S. taxes "Benedict Arnold corporations".

A Zogby International August 2004 poll found that 71% of American voters believed "outsourcing jobs overseas" hurt the economy while another 62% believed that the U.S. government should impose some legislative action against these companies, possibly in the form of increased taxes.[157][158] President Obama promoted the 'Bring Jobs Home Act' to help reshore jobs by using tax cuts and credits for moving operations back to the USA.[159] The same bill was reintroduced in the 113th United States Congress as the Bring Jobs Home Act (S. 2569; 113th Congress).[160][161]

While labor advocates claim union busting as one possible cause of outsourcing,[162] another claim is high corporate income tax rate in the U.S. relative to other OECD nations,[163][164] and the practice of taxing revenues earned outside of U.S. jurisdiction, a very uncommon practice. Some counterclaim that the actual taxes paid by US corporations may be considerably lower than "official" rates due to the use of tax loopholes, tax havens, and "gaming the system".[165]

Sarbanes-Oxley has also been cited as a factor.

Europe

Council Directive 77/187 of 14 February 1977 protects employees' rights in the event of transfers of undertakings, businesses or parts of businesses (as amended 29 June 1998, Directive 98/50/EC & 12 March 2001's Directive 2001/23). Rights acquired by employees with the former employer are to be safeguarded when they, together with the undertaking in which they are employed, are transferred to another employer, i.e., the contractor.

Case subsequent to the European Court of Justice's Christel Schmidt v. Spar- und Leihkasse der früheren Ämter Bordesholm, Kiel und Cronshagen, Case C-392/92 [1994] have disputed whether a particular contracting-out exercise constituted a transfer of an undertaking (see, for example, Ayse Süzen v. Zehnacker Gebäudereinigung GmbH Krankenhausservice, Case C-13/95 [1997]). In principle, employees may benefit from the protection offered by the directive.

Asia

Countries that have been the focus of outsourcing include India, Pakistan, and the Philippines for American and European companies, and China and Vietnam for Japanese companies.

The Asian IT service market is still in its infancy, but in 2008 industry think tank Nasscom-McKinsey predicted a $17 billion IT service industry in India alone.[166]

A China-based company, Lenovo, outsourced/reshored manufacturing of some time-critical customized PCs to the U.S. since "If it made them in China they would spend six weeks on a ship."[114]

Article 44 of Japan's Employment Security Act implicitly bans the domestic/foreign workers supplied by unauthorized companies regardless of their operating locations. The law will apply if at least one party of suppliers, clients, labors reside in Japan, and if the labors are the integral part of the chain of command by the client company, or the supplier.

• No person shall carry out a labor supply business or have workers supplied by a person who carries out a labor supply business work under his/her own directions or orders, except in cases provided for in the following Article.
  • A person who falls under any of the following items shall be punished by imprisonment with work for not more than one year or a fine of not more than one million yen. (Article 64)
• Unless permitted by act, no person shall obtain profit by intervening, as a business, in the employment of another.[167]

Victims can lodge a criminal complaint against the CEO of the suppliers and clients. The CEO risks arrest, and the Japanese company may face a private settlement with financial package in the range between 20 and 100 million JPY (200,000 - million USD).

Nearshoring

When the New York Times headlined "Near Source of Supplies the Best Policy"[168] their main focus was on "cost of production." Although transportation cost was addressed, they did not choose among:

• transporting supplies to place of production[169]

• transporting finished goods to place(s) of sale
• cost and availability of labor

Nearshoring or Nearsourcing is having business processes, especially information technology processes such as application maintenance and development or testing, in a nearby country, often sharing a border with the target country. Commonalities usually include: geographic, temporal (time zone), cultural, social, linguistic, economic, political, or historical linkages.[170] However, some of these commonalities — such as cultural, social, and linguistic linkages — can also be achieved through offshore outsourcing because, historically, several nations have attempted at expanding their territory and control over other, more distant nations through colonization.

The term Nearshoring is a derivative of the business term offshoring. The hybrid term "nearshore outsourcing" is sometimes used as an alternative for nearshoring, since nearshore workers are not employees of the company for which the work is performed. It can also be a reversal, by contracting a development partner in a different country but in close proximity (same or nearby time zone), facilitating communication and allowing frequent visits. This is a business strategy to place some or all of its operations close to where its products are sold. Typically, this is contrasted with the trend to outsource low-wage manufacturing operations to developing nations (offshoring), and reflects a reversal of that trend. Sometime, the work is done by an outside contracted company rather than internally (insourcing), but unlike offshore outsourcing, the work is done in fairly close proximity to either the company headquarters or its target market.

In Europe, nearshore outsourcing relationships are between clients in larger European economies and various providers in smaller European nations.

Major centers are Poland, Ukraine, Belarus, Czech Republic, Romania, Bulgaria, Hungary, Portugal, Slovakia, and the Baltic. The attraction is lower-cost skilled labor forces, and a less stringent regulatory environment, but crucially they allow for more day to day physical oversight. These countries also have strong cultural ties to the major economic centers in Europe as they are part of EU. For example, as of 2020 Portugal is considered to be the most trending outsourcing destination[171] as big companies like Mercedes, Google,[172] Jaguar, Sky News, Natixis and BNP Paribas opening development centers in Lisbon and Porto, where labor costs are lower, talent comes from excellent Universities, there's availability of skills and the time zone is GMT (the same as London).[173] The WebSummit is considered to be one of the biggest drivers[174] of this trend since 2017.

In the US, American clients nearshore to Canada and Mexico, as well as to many nations in Central and South America.

Culture

Cultural alignment with the business is often more readily achieved through near-sourcing due to there being similarities between the cultures in which the business is located and in which services are sub-contracted, including for example proficiency with the language used in that culture.[77]

Communication

Constraints imposed by time zones can complicate communication; near-sourcing or nearshoring offers a solution. English language skills are the cornerstone of Nearshore and IT services. Collaboration by universities, industry, and government has slowly produced improvements. Proximity also facilitates in-person interaction regularly and/or when required.[175][176][177]

Other Advantages

Software development nearshoring is mainly due to flexibility when it comes to upscale or downscale[178] teams or availability of low cost skilled developers.[179] The nearshoring of call centers, shared services centers, and (Business Process Outsourcing) rose as offshore outsourcing was seen to be relatively less valuable.[180]

The complexities of offshoring stem from language and cultural differences, travel distances, workday/time zone mismatches, and greater effort for needed for establishing trust and long-term relationships. Many nearshore providers attempted to circumvent communication and project management barriers by developing new ways to align organizations. As a result, concepts such as remote insourcing were created to give clients more control in managing their own projects. Nearshoring still hasn't overcome all barriers, but proximity allows more flexibility to align organizations.[181]

Visa requirements

The United States has a special visa, the H-1B,[182] which enables American companies to temporarily (up to three years, or by extension, six) hire foreign workers to supplement their employees or replace those holding existing positions. In hearings on this matter, a United States senator called these "their outsourcing visa."[183]

Examples

• In 2003 Procter & Gamble outsourced their facilities' management support, but it did not involve offshoring.[184]
• Dell offshored to India in 2001 but reversed since "customers were not happy with the prior arrangement ..."[11]

Print and mail outsourcing

Print and mail outsourcing is the outsourcing of document printing and distribution.

The Print Services & Distribution Association was formed in 1946, and its members provide services that today might involve the word outsource. Similarly, members of the Direct Mail Marketing Association were the "outsourcers" for advertising agencies and others doing mailings. DMMA celebrated their 100th anniversary in 2017.

The term "outsourcing" became very common in the print and mail business during the 1990s, and later expanded to be very broad and inclusive of most any process by the year 2000. Today, there are web based print to mail solutions for small to mid-size companies which allow the user to send one to thousands of documents into the mail stream, directly from a desktop or web interface.[185]

Marketing outsourcing

The term outsource marketing has been used in Britain to mean the outsourcing of the marketing function.[186] The motivation for this has been:

• cost reduction.[187][188]
• specialized expertise.[189]
• speed of execution
• short term staff augmentation[190]

While much of this work is the "bread and butter" of specialized departments within advertising agencies, sometimes specialist are used, such as when the Guardian newspaper outsourced most of their marketing design in May 2010.[191]

Business process outsourcing

Business process outsourcing (BPO) is a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca-Cola that outsourced large segments of its supply chain.[192]

BPO is typically categorized into back office and front office outsourcing.[193]

BPO can be offshore outsourcing, near-shore outsourcing to a nearby country, or onshore outsource to the same country. Information Technology Enabled Service (ITES-BPO),[194] Knowledge process outsourcing (KPO) and Legal process outsourcing (LPO) are some of the sub-segments of BPO.

Although BPO began as a cost-reducer, changes (specifically the move to more service-based rather than product-based contracts), companies now choose to outsource their back-office increasingly for time flexibility and direct quality control.[195] Business process outsourcing enhances the flexibility of an organization in different ways:

BPO vendor charges are project-based or fee-for-service, using business models such as Remote In-Sourcing or similar software development and outsourcing models.[196][197] This can help a company to become more flexible by transforming fixed into variable costs.[198] A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.[199]

BPO also permits focusing on a company's core competencies.[200]

Supply chain management with effective use of supply chain partners and business process outsourcing can increase the speed of several business processes.[201]

BPO caveats

Even various contractual compensation strategies may leave the company as having a new "single point of failure" (where even an after the fact payment is not enough to offset "complete failure of the customer's business").[202] Unclear contractual issues are not the only risks; there's also changing requirements and unforeseen charges, failure to meet service levels, and a dependence on the BPO which reduces flexibility. The latter is called lock-in; flexibility may be lost due to penalty clauses and other contract terms.[203] Also, the selection criteria may seem vague and undifferentiated[204]

Security risks can arise regarding both from physical communication and from a privacy perspective. Employee attitude may change, and the company risks losing independence.[205][206]

Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximising positive outcome, minimising risks and avoiding any threats, a business continuity management (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.[207]

Analytical hierarchy process (AHP) is a framework of BPO focused on identifying potential outsourceable information systems.[208] L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT processes.[209]

Technological pressures

Industry analysts have identified robotic process automation (RPA) software and in particular the enhanced self-guided RPAAI based on artificial intelligence as a potential threat to the industry[210][211] and speculate as to the likely long-term impact.[212] In the short term, however, there is likely to be little impact as existing contracts run their course: it is only reasonable to expect demand for cost efficiency and innovation to result in transformative changes at the point of contract renewals. With the average length of a BPO contract being 5 years or more[213] – and many contracts being longer – this hypothesis will take some time to play out.

On the other hand, an academic study by the London School of Economics was at pains to counter the so-called "myth" that RPA will bring back many jobs from offshore.[214] One possible argument behind such an assertion is that new technology provides new opportunities for increased quality, reliability, scalability and cost control, thus enabling BPO providers to increasingly compete on an outcomes-based model rather than competing on cost alone. With the core offering potentially changing from a "lift and shift" approach based on fixed costs to a more qualitative, service based and outcomes-based model, there is perhaps a new opportunity to grow the BPO industry with a new offering.

Industry size

One estimate of the worldwide BPO market from the BPO Services Global Industry Almanac 2017, puts the size of the industry in 2016 at about US$140 billion.[215]

India, China and the Philippines are major powerhouses in the industry. In 2017, in India, the BPO industry generated US$30 billion in revenue according to the national industry association.[216] The BPO industry is a small segment of the total outsourcing industry in India. The BPO industry workforce in India is expected to shrink by 14% in 2021.[217]

The BPO industry and IT services industry in combination are worth a total of US$154 billion in revenue in 2017.[218] The BPO industry in the Philippines generated $22.9 billion in revenues in 2016,[219] while around 700 thousand medium and high skill jobs would be created by 2022.[220]

In 2015, official statistics put the size of the total outsourcing industry in China, including not only the BPO industry but also IT outsourcing services, at $130.9 billion.[221]

Economic theory

In economic theory, the pros and cons of outsourcing have been discussed since Ronald Coase (1937) asked the famous question: Why is not all production carried on by one big firm?[222] An informal answer has been provided by Oliver Williamson (1979), who has emphasized the importance of different transaction costs within and between firms.[223] The boundaries of the firm (i.e., the distinction between transactions taking place within a firm and transactions between different firms) have been formally studied by Oliver Hart (1995) and his coauthors.[224] According to the property rights approach to the theory of the firm based on incomplete contracting, the ownership structure (i.e., integration or non-integration) determines how the returns to non-contractible investments will be divided in future negotiations. Hence, whether or not outsourcing an activity to a different firm is optimal depends on the relative importance of the investments that the trading partners have to make. For instance, if only one party has to make an important non-contractible investment decision, then this party should be owner.[225][226] However, the conclusions of the incomplete contracting theory crucially rely on the specification of the negotiations protocol (DeMeza and Lockwood, 1998)[227] and on whether or not there is asymmetric information (Schmitz, 2006).[228]

See also

• Banking BPO services
• BPO security
• Business process outsourcing to India
• Business process outsourcing in the Philippines
• Business process outsourcing in China
• Call center industry in the Philippines
• Call center industry in Bangladesh
• Contingent workforce
• Crowdsourcing
• Facilities management
• Freelance marketplace
• Globality
• Global sourcing
• Globalization
• Globally Integrated Enterprise
• Offshore custom software development
• Offshoring Research Network
• Outsourced document processing
• Professional Employer Organization
• Programmers Guild
• Recruitment
• Selfsourcing
• Software testing outsourcing
• Supply chain
• Telecentre
• Telecommuting
• Virtual assistance

References

1. "Oursourcing". Britannica.com.
2. Ian McCarthy; Angela Anagnostou (2004). "The impact of outsourcing on the transaction costs and boundaries of manufacturing". International Journal of Production Economics. 88 (1): 61–71. CiteSeerX 10.1.1.468.9139. doi:10.1016/s0925-5273(03)00183-x.
3. Stuart Rosenberg (2018). The Global Supply Chain and Risk Management. ISBN 978-1631579592.
4. Outsource 1979, outsourcing 1981: Organizing Identity, Persons and Organizations After Theory. CTI Reviews. 2016. ISBN 978-1497042155.
5. OED
6. Adrian Victor; Alexandru Dumitru Bodislav. "Outsourcing. The Concept" (PDF).
7. "Judge Rebukes Government for Outsourcing Internal Investigation of LIBOR rigging". June 28, 2019.
8. Jamieson, Dave, "Public Interest Group Challenges Privatization Of Local, State Government Services" Archived 2013-12-11 at the Wayback Machine, The Huffington Post, July 1, 2013. Retrieved 2013-07-01
9. Hira, Ron, and Anil Hira. Outsourcing America: What's behind Our National Crisis and How We Can Reclaim American Jobs. New York: AMACOM, 2008. Print # 67-96.
10. Davies, Paul. What's This India Business?: Offshoring, Outsourcing, and the Global Services Revolution. London: Nicholas Brealey International, 2004. Print.
11. Elizabeth Corcoran (April 28, 2004). "Dell moves outsourced jobs back to U.S. shores". Retrieved 2019-05-14. customers were not happy with ...
12. "Offshore insurers creating concerns among regulators". The New York Times. October 19, 1992.
13. Cliff Justice; Stan Lepeak. "Captive Audience: How to Partner with Service Providers to Improve In-House Offshore Operations". CIO magazine. a.k.a. internal shared-services centers in low-cost locations
14. N. G. Mankiw; P. Swagel (2006). "The Politics and Economics of Offshore Outsourcing" (PDF). Harvard.edu (drafted 2005, published 2006: working paper for the American Enterprise Institute for Public Policy).
15. also called domestic outsourcing. "Domestic Inshoring and Farmshoring".
16. "New words". Macmillan English Dictionary. Retrieved 2007-10-05.
18. Kevin G. Hall (December 5, 2006). "Homeshoring Grows: Companies Cut Costs by Shipping Jobs to Workers' Homes". Knight Ridder. Archived from the original on October 20, 2007.
19. Ben Zimmerman (September 13, 2019). "What Are The Benefits Of In-Housing Versus Outsourcing?".
20. Aleksandr Simukovic (April 15, 2019). "In-housing versus Outsourcing. Should you move your digital marketing in-house?".
21. "Delegated authority: Outsourcing in the general insurance market" (PDF). June 29, 2015.
22. "Binder and other intermediary agreements". April 5, 2012.
23. Also called Legal outsourcing
24. "The Evolution of Sourcing Advisory". Avasant. 2016-06-14. Retrieved 2020-10-23.
25. Forrester Research, Inc., The Forrester Wave™: Global Infrastructure Outsourcing, Q1 2015, published 13 January 2015, accessed 21 November 2020
26. Abbie Lundberg (April 1, 1997). "Outsourcing: Letter from the editor". CIO. p. 12.
27. "Messaging and Collaboration". InfoWorld. February 21, 2000. p. 14. ... will offer .. through .. "midsourcing" model
28. Harold F. Tipton; Micki Krause (2003). Information Security Management Handbook, Fifth Edition. ISBN 978-0-8493-1997-6. The term midsourcing refers to ...
29. The term "Midsourcing" subsequently became known as contracting a local or regional manufacturing service provider to arrange for the outsourced task(s). "Your Source for Commercial Manufacturing Services". October 10, 2017.
30. B. Olive (2004). "Outsourcing Growing, Despite Controversy". Power: 148(4), 19–20.
31. Marian Haus (2011). "Best 10 Peter Drucker quotes". pmseed. pmseed. Archived from the original on April 16, 2015. Retrieved 26 April 2015.
32. Drucker, Peter F. (1989), "Sell the Mailroom", Wall Street Journal, accessible at "Archived copy". Archived from the original on 2015-05-22. Retrieved 2015-04-27.CS1 maint: archived copy as title (link)
33. Ken Belson (April 11, 2004). "Outsourcing, Turned Inside Out".
34. Overby, S (2007) ABC: An Introduction to Outsourcing Archived 2007-06-30 at the Wayback Machine. CIO.com.
35. "A Brief History of Outsourcing".
36. "Outsourcing emerged as a new business strategy in early 1980s". September 20, 2010.
37. EDS's founder named it for Mort Meyerson
38. "IAOP Announces Outsourcing Hall of Fame Inductees". IAOP.org (The International Association of Outsourcing Professionals). January 8, 2013.
39. Judy Artunian (May 8, 2006). "The Seven Deadly Sins of Outsourcing". Computerworld. p. 58.
40. C. Warren Axelrod (2004). Outsourcing Information Security. p. 216.
41. Mostafa Hashem Sherif (2006). Managing Projects in Telecommunication Services. ISBN 0470047674. (chapter) COMMUNICATION AND OUTSOURCING ... Roche, 1998
42. "How Globalization is Reshaping the Engineering Services Outsourcing Market". June 22, 2015.
43. (Q4 2006)Mandatory Multisourcing Discipline Archived 2007-09-28 at the Wayback Machine Business Trends Quarterly
44. (2006) Mandatory Multisourcing Discipline Archived 2007-11-19 at the Wayback Machine
45. See Holcomb & Hitt, 2007 and Vested outsourcing
46. Rick Wartzman (February 5, 2010). "The Drucker Difference: Insourcing and Outsourcing: the Right Mix". Bloomberg Business. Bloomberg L.P. Archived from the original on May 22, 2015. Retrieved May 6, 2015.
47. Gwynne Richards (2014). Warehouse Management: A Complete Guide To Improving Efficiency and Minimizing Costs In the Modern Warehouse (Second ed.). Walnut Street Suite 1100 Philadelphia PA 19102: Kogan Page Limited. p. 316. ISBN 978-0-7494-6934-4. Archived from the original on September 24, 2015. Retrieved May 6, 2015.CS1 maint: location (link)
48. (discussed in the book The World is Flat).
49. Stephan Manning; Jörg Sydow; Arnold Windeler (2012). "Securing Access to Lower-cost Talent Globally: The Dynamics of Active Embedding and Field Structuration" (PDF). Regional Studies. 46 (9): 1201–1218. doi:10.1080/00343404.2011.571243. S2CID 27458563.
50. Gillis, A. (2001, Digital sweatshops. This, 34, 6-6.
51. Barrett J. Brunsman (April 3, 2018). "Former P&G manager elected president of Costa Rica". Cincinnati Business Courier.
52. Ross, J; Irani, L; Silberman, M.S.; Zaldivar, A; Tomlinson, B (2010). "Who are the Crowdworkers? Shifting Demographics in Mechanical Turk". CHI 2010.
53. Kate M. Manuel; Jack Maskell (May 5, 2011). "Insourcing Functions Performed by Federal Contractors: An Overview of the Legal Issues" (PDF). The Washington Post.
54. Albert R. Hunt (February 18, 2007). "Letter From Washington: As U.S. rich-poor gap grows, so does public outcry – Americas – International Herald Tribune". The New York Times.
55. Forey, Gail, and Jane Lockwood. Globalization, Communication and the Workplace: Talking across the World. New York: Continuum, 2011. Electronic Book #21-26.
56. Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis — and How We Can Fix It. New York: Sentinel, 2004. Print 97-118.
57. "You don't hear complaints about Bill Gates."
58. Carbon Copy accepted tax credits to move software duplication and packaging to Puerto Rico: (Captive) Larry Luxner (January 26, 1989). "Tax Benefits, Low Labor Costs lure Microcom to Puerto Rico". the third U.S. software manufacturer to select Puerto Rico as a production site for the booming U.S. software market.
59. Ellen Gamerman (June 2, 2007). "Outsourcing Your Life". Wall Street Journal (WSJ). Retrieved October 10, 2018.
60. "Define Outsourcing Models: 5 Forms of Business Process Outsourcing". January 29, 2015.
61. "Britain's outsourcing model, copied around the world, is in trouble". The Economist. June 28, 2018.
62. "Vested: A Business Model for 21st Century Outsourcing". May 29, 2012.
63. Vested outsourcing
64. "Outsourcing model redesign". ADLittle (Arthur D. Little).
65. Nicholas Sinclair (August 21, 2014). "Models of Outsourcing". The Outsourced Accountant. Archived from the original on June 27, 2018. Retrieved February 19, 2019.
66. Serhiy Haziyev; Halyna Semenova (June 4, 2015). "Outsourcing Engagement Models". Network World. IDG. Archived from the original on May 19, 2018. Retrieved February 19, 2019.
67. Nils Brede Moe; Darja Šmite; Geir Kjetil Hanssen; Hamish Barney (2013-08-29). "From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts". Empirical Software Engineering. 19 (5): 1225–1258. doi:10.1007/s10664-013-9272-x. ISSN 1382-3256. S2CID 6243809.
68. Andrew R. McIlvaine (March 16, 2008). "'Co-Sourcing' and More". hreonline.com. Archived from the original on May 13, 2013. Retrieved May 23, 2012.
69. Diane Rezendes Khirallah (September 2, 2002). "Out With 'Outsourcing' And In With 'Co-Sourcing'". informationweek.com. Retrieved May 23, 2012.
70. Business Dictionary: "Archived copy". Archived from the original on 2016-08-19. Retrieved 2016-08-18.CS1 maint: archived copy as title (link)
71. "68 success secrets". microsoft.com.
72. "extending messaging to enterprise collaboration" (PDF). IBM.com.
73. "Globalisation shakes the world". January 21, 2007. Retrieved April 10, 2019 – via news.bbc.co.uk.
74. "UN Information Economy Report 2010". p. 49.
75. Lee Branstetter; Britta Glennon; J. Bradford Jensen (August 21, 2018). "The IT revolution and the globalisation of R&D".
76. "Offshore Outsourcing: Why Russia?". Retrieved April 10, 2019.
77. Gabriel Fuchs (September 14, 2007). "Communication: The Holy Grail of Outsourcing". CIO magazine.
78. "Usability Issues in Offshore Development: an Indian Perspective", accessed January 8, 2013
79. "What Happens to Usability when Development goes Offshore?", accessed January 8, 2013
80. "Offshore Development Culture and User Experience", accessed January 8, 2013
81. How to protect intellectual property and confidential information dealing with offshore software development company? https://belitsoft.com/offshore-software-development-company/protect-intellectual-property-and-confidential-information
82. "R&D the Latest Target of Silicon Valley Outsourcing - InternetNews". internetnews.com. Retrieved April 10, 2019.
83. "US tightens grip on Indian R&D centres". Rediff. Retrieved April 10, 2019.
84. Sujata Dutta Sachdeva (December 3, 2006). "Desi scientists help MNCs with R&D solutions". Retrieved April 10, 2019 – via The Economic Times.
85. Nirmalya Kumar; Phanish Puranam (2011). India Inside: The Emerging Innovation Challenge to the West. ISBN 978-1422142400.
86. "It's time to stop Outsourcing Pharma R&D to India". October 2012.
87. Rebecca S. Eisner; Daniel A. Masur; Brad L. Peterson (2018). "The Future of Outsourcing" (PDF). Retrieved 2019-04-17.
88. 4 countries to outsource software development to. Relevant. https://relevant.software/blog/4-best-countries-to-outsource-software-development-to/
89. Indian BPOs Dial Eastern Europe. Jun 2009. http://articles.economictimes.indiatimes.com/2009-06-12/news/27663963_1_indian-bpo-outsourcing-market-india-s-bpo
90. Anna Frazzetto (March 21, 2018). "Outsourcing In The New Normal: Three Trends Reshaping The Global Industry". Forbes. Retrieved 2019-04-17.
91. South Korea requires giving digital service even when "the user refuses to give permission for data or functions that are not necessary to the provision of the service".
92. Obwegeser, Nikolaus; Arenfeldt, Katrine; Dam, Amalie Corty; Fenger, Kim Harder; Silkjaer, Johan Vang (2020-01-02). "Aligning drivers, contractual governance, and relationship management of IT-outsourcing initiatives". Journal of Information Technology Case and Application Research. 22 (1): 40–66. doi:10.1080/15228053.2020.1786265. ISSN 1522-8053. S2CID 221056997.
93. Jensen, Preben; Ladefoged, Christian; Søgård, Michael; Obwegeser, Nikolaus (2015), Wrycza, Stanislaw (ed.), "Trust and Control in Complex Information Systems Development", Information Systems: Development, Applications, Education, Cham: Springer International Publishing, 232, pp. 32–44, doi:10.1007/978-3-319-24366-5_3, ISBN 978-3-319-24365-8, retrieved 2020-09-17
94. Maida, Martina; Maier, Konradin; Obwegeser, Nikolaus; Stix, Volker (2012), Huemer, Christian; Lops, Pasquale (eds.), "A Multidimensional Model of Trust in Recommender Systems", E-Commerce and Web Technologies, Berlin, Heidelberg: Springer Berlin Heidelberg, 123, pp. 212–219, doi:10.1007/978-3-642-32273-0_19, ISBN 978-3-642-32272-3, retrieved 2020-09-17
95. Nadeem, S (2009) Macaulay's (Cyber) Children: The Cultural Politics of Outsourcing in India Archived 2010-06-20 at the Wayback Machine. Cultural Sociology.
96. Alster, N (2005) Customer Disservice. Archived 2007-07-02 at the Wayback Machine CFO.com.
97. The words "100% U.S.Based Customer Service" (followed by "Talk to a real person any time") are on the back of envelopes mailed by a major USA corporation.
98. "Discover card's 100% U.S. Based Customer Service". March 18, 2019.
99. "Dis..." Retrieved March 29, 2019.
100. Williamson, Oliver E. (1979) "Transaction-Cost Economics: The Governance of Contractual Relations," Journal of Law and Economics: Vol. 22: No. 2, Article 3|accessible at: "Archived copy". Archived from the original on 2016-09-19. Retrieved 2016-08-16.CS1 maint: archived copy as title (link)
101. Kate Vitasek (2011). The Vested Outsourcing Manual (first ed.). New York: Palgrave Macmillan. ISBN 978-0-230-11268-1.
102. Also see relational contract
103. "Outsourcing exposes firms to fraud". BBC.co.uk. June 16, 2005.
104. J. Ribeiro (2005). "Indian call center workers charged with Citibank fraud". InfoWorld.com. Archived from the original on 2015-09-24. Retrieved 2015-05-18.
105. Richard Baldwin. The Great Convergence: Information Technology and the New Globalization.
106. "Speech by Sir David Clementi to the Oxford Media". BBC.com. March 18, 2019. oversight of the BBC, including step-in rights
107. David Brown (April 1, 2016). "Collateral Warranties and Third Party Rights". FCA Magazine.
108. Jim Ditmore. "Why IT Outsourcing Often Fails". InformationWeek. ineffectual leadership, process failures, talent issues
109. Ephraim Schwartz. "IT Outsourcing Gone Bad: 4 Painful Lessons". In the .. $4 billion deal between the U.S. Navy and .. EDS, .. in 2003, ... reasons behind the failure are complex, but ..
110. Eric Savitz; Andy Sealock; Christopher Stacy (January 16, 2013). "Why Some U.S. Companies Are Giving Up On Outsourcing". Forbes. GM is not the only company to pull back at least a portion of its previously outsourced offshore IT operations.
111. NYTimes,2017: "Mr. Lacerte ... had farmed out but the headaches of navigating time zones, cultures and language ... problems went away when ...
112. Steve Lohr (July 30, 2017). "Hot Spot for Tech Outsourcing: The United States". NYTimes.com.
113. Carl Richards (May 7, 2018). "Maybe You Shouldn't Outsource Everything After All". The New York Times.
114. Tamzin Booth (January 17, 2013). "Here, There and Everywhere - After decades of sending work across the world, companies are rethinking their offshoring strategies". The Economist (London). Archived from the original on January 18, 2013. Retrieved January 19, 2013.
115. Floyd Norris; chief financial correspondent (January 29, 2013). "Outsourcing, Insourcing and Automation". The New York Times.
116. "Outsourcing accelerates forward", (2016) Deloitte 2016 Global Outsourcing Survey accessed 18 August 2016 at "Archived copy" (PDF). Archived from the original (PDF) on 2017-01-12. Retrieved 2016-08-18.CS1 maint: archived copy as title (link)
117. "Outsourcing, BPO & Contract Manufacturing Market Research-Access Industry Trends, Revenues, Statistics, Forecasts, Technologies, Mailing Lists". Plunkettresearch.com. Retrieved 2017-05-23.
118. Margaret Rouse. "What is insourcing? - Definition from WhatIs.com". Whatis.techtarget.com. Retrieved 2017-05-23.
119. Marc J. Schniederjans, Outsourcing and Insourcing In an International Context(New York: M.E. Sharpe, 2005) 3.
120. Shermon, G (2017). "Digital Talent – Business Models and Competencies" Page 190
121. such as taxes, education, or workforce skill sets
122. David Van Adelsberg, and Edward A Trolley, "Strategic Insourcing: Getting the Most from the Best," Training and Development 52. no. 7 (1998): 57-59.
123. Adam Smith, The Wealth of Nations: Part II (New York: Princeton Library, 1902), 102-104
124. Robert C. Feenstra, Gordon H. Hanson, "Globalization, Outsourcing, and Wage Inequality." American Economic Review 86. no 2 (1996): 240-245.
125. Harold L. Sirkin (2011-08-25). "Made in America, Again". Bcg.perspectives. Retrieved 2017-05-23.
126. Mary Amiti; Shang-Jin Wei (2004). "Fear of Service Outsourcing: Is it Justified?" (PDF). WP/04/186, International Monetary Fund. Retrieved 2017-05-23.
127. Paul Krugman (December 12, 2007). "The Trouble with Trade". The New York Times.
128. "What to Do Now: Shape Up". The Economist. January 2013.
129. "Top Reasons for Reshoring in Manufacturing - Manor Tool". Manor Tool. 2015-01-29. Retrieved 2018-02-08.
130. "Reshoring: By the Numbers". IndustryWeek. 2017-03-20. Retrieved 2018-02-08.
131. "Business Process Outsourcing – Captive service or third party vendors?". OutsourceNews. Archived from the original on 2008-10-11. Retrieved 2008-10-09.
132. "Gartner: Don't forget to insource". Searchcio.techtarget.com. 2003-09-04. Retrieved 2017-05-23.
133. "Archived copy". Archived from the original on 2013-03-03. Retrieved 2013-03-25.CS1 maint: archived copy as title (link)
134. January: "The Past and Future of American Manufacturing". Cite magazine requires |magazine= (help)
135. February: "Manufacturing is Special: Why America Needs its Makers". Cite magazine requires |magazine= (help)
136. June:"The Amazing (and Puzzling) Manufacturing Recovery". Cite magazine requires |magazine= (help)
137. December: "The Insourcing Boom". Cite magazine requires |magazine= (help)
138. Krugman, Paul (2006). "Feeling No Pain." New York Times, March 6, 2006.
139. "Union takes action against university on grounds of discrimination against outsourced BAME staff". Retrieved 2020-08-01.
140. Elia, Petros (2019-10-24). "It's time for universities to stop underpaying their outsourced workers | Petros Elia". The Guardian. ISSN 0261-3077. Retrieved 2020-08-01.
141. "Subscribe to read | Financial Times". www.ft.com. Retrieved 2020-08-01. Cite uses generic title (help)
142. "Subscribe to read | Financial Times". www.ft.com. Retrieved 2020-08-01. Cite uses generic title (help)
143. Bailey, David and Soyoung Kim (June 26, 2009).GE's Immelt says U.S. economy needs industrial renewal Archived 2015-06-11 at the Wayback Machine.UK Guardian.. Retrieved on June 28, 2009.
144. Office of the Press Secretary. "President Obama Issues Call to Action to Invest in America at White House "Insourcing American Jobs" Forum". The White House. Retrieved January 11, 2012.
145. Richard Baldwin (2006). Globalisation: the great unbundling(s), Chapter 1: Globalization Challenges for Europe. Secretariat of the Economic Council, Finnish Prime Minister's Office, Helsinki, 2006.
146. Stiglitz, J. And Charlton, A., (2005). "Trade can be Good for Development," Ch. 2 in Fair Trade for All, Oxford University Press, Oxford, NY.
147. Hanson, G. (2003), "What Has Happened to Wages in Mexico Since NAFTA", NBER Working Paper Series, National Bureau of Economic Research, Cambridge, MA.
148. Krugman, P., Obtsfeld, M. And Melitz, M., (2012) "East Asia: Success and Crisis", in International Economics: Theory and Policy, Addison-Wesley.
149. "Outsourcing's Other Side". NYTimes.com. April 25, 2004.
150. Copeland, B. (2007), "Trade and the Environment: What do we do now", Ch. 39 in Handbook on International Trade Policy, ed. Kerr, W and Gaosford, J., Edward Elgar Publishing
151. John Markoff (June 27, 2012). "Google Tries Something Retro: Made in the U.S.A." The New York Times.
152. Christian F. Durach; Stefan Kurpjuweit; Stephan M. Wagner (2017-09-25). "The impact of additive manufacturing on supply chains". International Journal of Physical Distribution & Logistics Management. 47 (10): 954–971. doi:10.1108/ijpdlm-11-2016-0332. ISSN 0960-0035.
153. "Adidas to mass-produce 3D-printed shoe with Silicon Valley start-up". Reuters. April 7, 2017. Retrieved 2018-01-02.
154. Daisie Hobson. "China – It's in the Cards". Reshoring Institute Blog. Retrieved March 17, 2014.
155. Easterly, W. (2002), "Solow's Surprise: Investment is not the Key to Growth", Ch. 3 in The Elusive Quest for Growth, The MIT Press, Cambridge.
156. "Outsourcing 2018 (USA)".
157. Zogby International survey results online at zogby.com
158. Bonasia, J. (2010, December 03). Offshoring, for good or ill, comes of age putting India on the map competitive world markets demand outsourcing, but it does drain domestic jobs. Investor's Business Daily. A04.
159. Congressional Documents and Publications. (2012, May 16). Brown outlines "Bring Jobs Home Act" aim at encouraging business to bring hobs back to the U.S. 2012 Federal Information and News Dispatch, Inc.
160. Burgess Everett (July 23, 2014). "Borrowed time: Tale of a Walsh bill". Politico. Archived from the original on July 24, 2014. Retrieved July 25, 2014.
161. "S. 2569 – Summary". United States Congress. Archived from the original on July 28, 2014. Retrieved July 25, 2014.
162. "Tell Xerox to Stop Unionbusting and Shipping Jobs Overseas". American Rights at Work. Archived from the original on 2011-07-14. Retrieved 2011-03-09.
163. "U.S. Lagging Behind OECD Corporate Tax Trends". The Tax Foundation. 2006-05-05. Archived from the original on 2009-07-06. Retrieved 2010-03-15.
164. John Tamny. "John Tamny on Hillary Clinton Economics on NRO Financial". Article.nationalreview.com. Archived from the original on 2009-01-09. Retrieved 2010-03-15.
165. "High Corporate Tax Rate Is Misleading". Smartmoney.com. Archived from the original on 2010-02-10. Retrieved 2010-03-15.
166. Global Sourcing of Business and IT Services, https://books.google.com/books?id=_IHStt6MRukC&lpg
167. "日本法令外国語訳データベースシステム - [法令本文表示] - 労働基準法". www.japaneselawtranslation.go.jp. Retrieved April 10, 2019.
168. "How to handle material: Founding Industries Near Source of Supplies the Best Policy". The New York Times. November 30, 1913. p. 2.
169. "Factory migration". The New York Times. August 6, 1939. p. 5.
170. Erran Carmel; Pamela Abbott (October 2007). "Why 'nearshore' means that distance matters". Communications of the ACM.
171. "EY Attractiveness Survey Portugal" (PDF). EY.com (Ernst & Young). 2019-06-01.
172. "After Google, Portugal's tech scene gets boost from VW". Reuters. 2018-04-17. Retrieved 2020-08-05.
173. Nearshore, velv (2020-07-24). "Nearshoring in Portugal". Medium. Retrieved 2020-08-05.
174. Forbes "Why Startups are booming in the Portuguese Capital"
175. "Indian IT moves to 'near-sourcing'". Financial Times. November 1, 2006.
176. Elizabeth Mott. "Communication Problems When Outsourcing". Hearst Newspapers.
177. "Effective communication for successful outsourcing".
178. "Nearshore Software Development". 2020-07-21.
179. "Custom Software Development Company". nearshore-it.eu. Retrieved 2018-01-22.
180. "As Philippines Value Prop Sinks, Nearshore Steps Up, Says Atento Exec – Nearshore Americas". Nearshore Americas. 2017-08-23. Retrieved 2018-08-20.
181. Sam Cinquegrani. "Nearshoring: A Smart Alternative to Offshore". IT Today. Auerbach Publications. Retrieved January 9, 2011.
182. H1B
183. Senator Richard Durbin. "Floor Statement: H-1B Visa Reform". Archived from the original on 2011-01-08.
184. "5 Facts About Overseas Outsourcing". Center for American Progress. 2012-07-09. Retrieved 2018-05-31.
185. examples: Neopost.com's IS-330 Mailing System (desktop), Click2mail.com, USPS Web Tool Kit Application Program Interface ... web-based "Business Shipping Services & Direct Mail Options".
186. Jason Deans (May 17, 2010). "Guardian News & Media to outsource marketing design services". Retrieved April 10, 2019 – via www.theguardian.com.
187. Should You Outsource Your Marketing?. Harvard Business School. 2005-007-04.
188. "RSM Marketing | Outsourced Marketing Department". RSM Connect. Retrieved 2018-06-11.
189. "Leave It To The Experts: Should You Outsource Your Marketing?". forbes.com. Retrieved 2018-06-11.
190. "Employee Augmentation – Marketing Outsourcing – THiNK – Marketing Operations Advisory". think-moa.com.au. Retrieved 2017-12-05.
191. Jason Deans (May 17, 2010). "Guardian News & Media to outsource marketing design services". The Guardian. London.
192. Tas, J. & Sunder, S. 2004, Financial Services Business Process Outsourcing, Communications of the ACM, Vol 47, No. 5
193. "Getting A Piece Of Business Process Outsourcing". Forbes.
194. J. G. Nellis; David Parker (2006). Principles of Business Economics. Financial Times Prentice Hall. p. 213. ISBN 978-0-273-69306-2.
195. Sagoo, Anoop. "How IT is reinvigorating business process outsourcing" CIO. 6 Sep 2012. Retrieved 25 March 2013.
196. BPM Watch. "In-Sourcing Remotely: A Closer Look at an Emerging Outsourcing Trend" "Archived copy". Archived from the original on 2013-03-03. Retrieved 2013-03-25.CS1 maint: archived copy as title (link)
197. "Archived copy". Archived from the original on 2014-10-25. Retrieved 2013-03-25.CS1 maint: archived copy as title (link)
198. Willcocks, L., Hindle, J., Feeny, D. & Lacity, M. 2004, IT and Business Process Outsourcing: The Knowledge Potential, Information Systems Management, Vol. 21, pp 7–15
199. Gilley, K.M., Rasheed, A. 2000. Making More by Doing Less: An Analysis of Outsourcing and its Effects on Firm Performance. Journal of Management, 26 (4): 763-790.
200. Kakabadse, A., Kakabadse. N. 2002. Trends in Outsourcing: Contrasting USA and Europe. European Management Journal Vol. 20, No. 2: 189–198
201. Tas, Jeroen, Sunder, Shyam. 2004. Financial Services Business Process Outsourcing. COMMUNICATIONS OF THE ACM Vol. 47, No. 5
202. Dan Burge; Catherine Bingham; Amanda Lewis (February 1, 2012). "Risk transfer in outsourcing contracts". Westlaw.com. Retrieved July 11, 2019.
203. Michel, Vaughan, Fitzgerald, Guy. 1997. The IT outsourcing market place: vendors and their selection. Journal of Information Technology 12: 223-237
204. Adsit, D. (2009) Will a Toyota Emerge from the Pack of Me-Too BPO's?, In Queue "Archived copy". Archived from the original on April 10, 2009. Retrieved May 6, 2009.CS1 maint: archived copy as title (link)
205. Bunmi Cynthia Adeleye, Fenio Annansingh and Miguel Baptista Nunes. "Risk management practices in IS outsourcing: an investigation into commercial banks in Nigeria", International Journal of Information Management 24 (2004): 167-180.
206. K. Altinkemer, A. Chaturvedi and R. Gulati. "Information systems outsourcing: Issues and evidence", International Journal of Information Management 14- 4 (1994): 252- 268.
207. Forbes Gibb, and Steven Buchanan. "A framework for business continuity management", International Journal of Information Management 26- 2 (2006): 128- 141.
208. Chyan Yang and Jen-Bor Huang. "A decision model for IS outsourcing", International Journal of Information Management 20- 3 (2000): 225- 239.
209. L. Willcocks, M. Lacity and G. Fitzgerald. "Information technology outsourcing in Europe and the USA: Assessment issues", International Journal of Information Management 15-5 (1995): 333–351.
210. Robotic Automation Emerges as a Threat to Traditional Low Cost Outsourcing, HfS Research, archived from the original on 2015-09-21
211. Gartner Predicts 2014: Business and IT Services Are Facing the End of Outsourcing as We Know It, Gartner
212. Visions of the Future: The Next Decade in BPO, Outsource Magazine, archived from the original on 2015-04-13
213. Market Trends: Outsourcing Contracts, Worldwide, Gartner
214. Robotic Process Automation at Xchanging (PDF), London School of Economics
215. "The battle of the BPO titans: Eastern Europe vs. India". itproportal.com.
216. "India holds its global edge in BPM sector with $28billion revenue". ETCIO.com.
217. "Future of jobs in India" (PDF).
218. Ayan Pramanik (October 12, 2017). "BPM sector sees faster growth than IT services: Nasscom".
219. "Archived copy". Archived from the original on 2017-12-08. Retrieved 2017-12-07.CS1 maint: archived copy as title (link)
220. News, Katrina Domingo, ABS-CBN. "BPO automation may displace 40,000, add 700,000 jobs". ABS-CBN News. Retrieved 2020-07-22.
221. "China's service outsourcing grows in 2015". China Daily. January 20, 2016.
222. Coase, R. H. (1937). "The Nature of the Firm". Economica. 4 (16): 386–405. doi:10.1111/j.1468-0335.1937.tb00002.x. ISSN 0013-0427.
223. Williamson, Oliver E. (1979). "Transaction-Cost Economics: The Governance of Contractual Relations". The Journal of Law and Economics. 22 (2): 233–261. doi:10.1086/466942. ISSN 0022-2186. S2CID 8559551.
224. Hart, Oliver D. (1995). Firms, contracts, and financial structure. Oxford: Clarendon Press. ISBN 0-19-828881-6. OCLC 32703648.
225. Grossman, Sanford J.; Hart, Oliver D. (1986). "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration". Journal of Political Economy. 94 (4): 691–719. doi:10.1086/261404. ISSN 0022-3808.
226. Hart, Oliver; Moore, John (1990). "Property Rights and the Nature of the Firm". Journal of Political Economy. 98 (6): 1119–1158. doi:10.1086/261729. ISSN 0022-3808. S2CID 15892859.
227. de Meza, D.; Lockwood, B. (1998). "Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm". The Quarterly Journal of Economics. 113 (2): 361–386. doi:10.1162/003355398555621. ISSN 0033-5533.
228. Schmitz, Patrick W (2006). "Information Gathering, Transaction Costs, and the Property Rights Approach". American Economic Review. 96 (1): 422–434. doi:10.1257/000282806776157722. ISSN 0002-8282. S2CID 154717219.

Further reading

• James K. Jackson (2008-06-24). "Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data (RL32461)". Digitalcommons.ilr.cornell.edu. Congressional Research Service. Retrieved 2017-05-23.
• Kate M. Manuel; Jack Maskell (2013-02-22). "Insourcing Functions Performed by Federal Contractors: Legal Issues" (PDF). Fas.org. Congressional Research Service. Retrieved 2017-05-23.

External links

• Quotations related to Outsourcing at Wikiquote