Outsourcing

Ethics Paper Topic # 1: Option Two

Outsourcing is defined as sending out (work, for example) to an outside provider or manufacturer in order to cut costs. This although creates a moral dilemma, we then wonder is it good or bad? It takes jobs away from people here at home in the United States, but it is cheap labor which means lower costs. There are both pros and cons in this situation. To take a closer look at the "problem" of outsourcing we will take a look at Information Technology (IT) Outsourcing overseas in which a company hires another company abroad to take over some of its software associated tasks like managing data center, handling technical support and software maintenance. It has become a growing trend today. Technological corporations is America today are desperate to cut costs and are outsourcing jobs to the developing countries with a large talented human resource pool for significantly lesser wages.

IT market research firm Gartner Dataquest says that "companies outsourcing their software jobs see lower cost foreign labor as a key to growth in 2003 because of large pool of highly educated English speaking workers in countries like India and Philippines who get relatively low wages"(Gartner). As of year-end 2002, there were at least 14 mega deals worth a total of $28.4 billion compared with nine mega deals in 2001 worth a total of $15.1 billion. Companies are lured towards the savings obtained by hiring a programmer in India who would be paid $2500 per year whereas the same job would require a wage of at least $45000 in US. According to Forrester Research, the percentage of offshore outsourcing for U.S. IT budgets "took a leap from 12 percent in 2000 to 28 percent in 2003"(Leith). It also says that around 3.3 million U.S. services jobs will move offshore during the next 15 years, led by the IT industry and also estimates that companies can save up to 50% by outsourcing abroad.

Workers and different Unions in America are nervous about the expected job losses that result from outsourcing, where the countries on the receiving end are getting ready for a major leap in economical growth by building their tech sector. IT workers who are already suffering from shrinking wages, scarce jobs and layoffs due to the weak economy are alarmed by such a major job shift to other countries. Programmers who were receiving $130,000 per year a have now either landed in a IT job which pays around $40,000 or their left without a job.

Many organizations believe that by outsourcing they can give attention to better strategic core business activities rather than day-to-day things. Many CIOs today view outsourcing as the answer to their technological and strategic business needs. One of the advantages of outsourcing is flexibility when coming up with new ideas. Outsourcing is being driven by a combination of cost and speed.

A few economists argue that it poses a danger to the local economy and brings positive benefits to the beneficiary countries. American IT business "has contributed an estimated $10 billion to the Indian economy over recent years, according to reports, through IT outsourcing. But proponents argue that the U.S. work force will be spurred to develop more cutting edge skills and that high-end work will remain in the country" (Hyman). There is also fear that U.S. would lose its long held high technological leadership. A few anti-globalists argue that moving jobs abroad is exploitative as wages in the outsourced countries are significantly less than the wages here. But since people take up these jobs willingly we need to understand that they consider these jobs much prospective than the jobs which are already available for them. Few people are skeptic that as outsourcing increases over the years, U.S. would lose more higher skilled job market.

Many economists from the outsourced countries argue that It becomes more of free trade just like U.S. companies being set up all over the world. The receiver countries do not seem to be bothered by the rising protest against overseas outsourcing. They feel that it is just another outcry like the one against manufacturing outsourcing to Asian countries in the late seventies and expect them to die down soon. But what is being traded when a U.S. firm relocates its capital and technology in China, where it employs Chinese labor to produce goods for the U.S. market? Trade implies reciprocity, but there is none in outsourcing, only the export of domestic jobs.

Even though the IT companies say they are being forced by financial conditions, on a Utilitarian ground , Companies seem to be blameworthy. Utilitarianism or the Happiness theory requires one to develop and execute a sort of moral calculus. The "Greatest Happiness principle holds that actions are right in proportion as they tend to promote happiness; wrong as