Thursday, December 14, 2006

Outsourcing Benefits

The US Chamber of Commerce ("USCC") has apparently come out strongly in favour of Outsourcing as it considers it good for the US economy because it made good economic sense and it has reportedly decided to fight legislative moves against Outsourcing of jobs to India and other low-cost nations. The USCC ascribed the anti-outsourcing backlash on political factors and lack of information. The USCC reportedly feels that Outsourcing would strengthen US companies' bottom lines, boost earnings and lift stock prices and would benefit more than 50 per cent of US households that own stocks. It has also warned that the US will end up paying a heavy price if it enacted laws to halt the movement of jobs to cheaper destinations.

Cost Savings
India's National Association of Software and Service Companies ("NASSCOM") has reported that US businesses have witnessed significant cost savings by offshoring to India. For example, the US banking, financial services and insurance ("BFSI") sector's costs have lowered by 7-10% than that of its European counterparts. Also, US BFSI companies have saved USD 6 Billion in the last four years by Offshoring to India.

Jobs Creation
NASSCOM reported that nearly 170 Indian IT companies have offices in the US and that they employed nearly 60,000 people in the US in 2001, contributing to nearly USD 810 Million in taxes in 2001. Employees of Indian IT firms bought goods and services worth USD 1.2 Billion in the US and paid nearly $300 million towards social security in 2001.

Value Addition
NASSCOM has also reported that BFSI offshoring has resulted in quality and productivity gains of 15-20% and customer satisfaction of almost 85%. It also cites the example of the success of the US automobile industry due to Outsourcing. Presently, the automobile industry is the largest in the world and two of the world's biggest automobile companies are from the US. Over a surveyed period, the automobile industry reportedly grew 20% in sales and services with a constant workforce. Outsourcing apparently provided this industry a competitive edge and opened up opportunities in terms of investing in new equipment and re-engineering processes.

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