October 12, 2016 4:26 pm | Updated 3 months ago.
The buzzword of the millennium is Offshore Outsourcing. It is one of the most important issues to be debated over in Elections and is also a hot topic when economic development and growth is discussed. Outsourcing was prevalent in human history ever since the time of the barter system. The history of offshore outsourcing can be associated with the growth and development of modern business enterprise which came up towards the latter half of the 19th Century. D2e insights travel through time to help readers reflect on the factors that gave rise to offshore outsourcing.
The important timelines in the History of Outsourcing in America
The history of offshore outsourcing unfolds in America way back in the 1800s.The first offshore outsourcing jobs in America was sent to Scotland. The manufacturing of sails had to be fashioned according to certain specifications which could be done only in Scotland. Successful voyages to a large extent depended on good and strong sails. In the initial days, offshore outsourcing came into the business scenario because of the demand for expertise and not as a step to cut cost.
Offshore outsourcing gained momentum with the growth of manufacturing industries. America was once the manufacturing capital of the world. In the beginning, companies used to outsource work to other companies within the USA. However, this began to change in the later part of the 20th century. This era also witnessed the growth of computer technologies and tremendous growth in the IT sector. Companies gradually started outsourcing the non-core process to other organizations.
With the development of technology, in the 1980s, manufacturing companies in the USA started sending raw materials to other countries. The reason behind this was mainly to cut cost. The 1980s witnessed the offshore outsourcing of jobs other than payroll. The process of outsourcing to an offshore location that had initially started with non-core process moved on to the manufacturing sector and finally to Information technology. The WTO was created in the mid- the 1980s brought in the free market economy under the regime of Ronald Regan. A number of agreements like GATT, WTO and NAFTA were established to promote free trade. Eastman Kodak was one of the first companies to engage in IT outsourcing.
The 1990s witnessed a lot of changes in the technological domain. The technological boom bolstered offshore outsourcing to new heights. The Y2K scare along with technological developments created a shortage of manpower. Very few American students had the technological expertise and therefore some core – processes were outsourced mostly to Asian countries. These Asian countries provided the much-needed expertise at low cost.
The 21st century brought along with it the ‘Internet’- a revolution that changed the world. The year 2003 has been declared as the harbinger of the ‘Broadband Age’. High- speed internet was utilized globally which further helped in the growth of offshore outsourcing. The Internet also brought in with it globalization of technology which has led to the generation of innovation and collaboration.
Today, however, offshore outsourcing is a more strategic decision, focusing on core competencies. Some of the common reasons in the 21st-century includes:
• Enhancing company focus
• Access to world-class capabilities
• To free resources — cash and personnel — for other purposes, for instance, R&D
• Expertise is required for functions that are either time-consuming or are currently out of control
• To share risks and costs with a partner.
Offshore Outsourcing is thus a phenomenon that is here to stay, and falling back on protectionist measures is a surefire way of losing competitiveness in the global market.