The term outsourcing refers to contracting or getting business functions such as labor from an external source. One of the advantages of off-shoring is that it helps in cost reduction especially if it is outsourced from developing countries because there is a wage gap between what developed economies would pay their employees and what they pay employees from developing countries. Most companies outsource services that are meant to improve the effectiveness and efficiency of their core business. As such, they give special attention to their core businesses since they outsource from specialized companies (Schniederjans, et.al, 2005). Another major benefit of outsourcing is access to wide range of high quality talent especially in fields such as engineering. At times, some businesses are too risky and a company from an industrialized economy may wish to outsource from an organization that is in a better position to mitigate the risk (Schniederjans, et.al, 2005).
Despite the benefits, outsourcing may lead to increased costs: if the outsourcing organization wishes to change the contents of the initial agreement, there is a high probability that addition heavy costs will be incurred. Outsourcing may lead to a negative impact on the company’s customers, especially if there is a delay before customers get their deliveries. Outsourcing may also pose risks to the organization in that, the outsourcing company may reveal their business secrets to the company it is outsourcing from and in return, the company may expose the secrets to a competitor thus giving the competitor a competitive edge (Schniederjans, et.al, 2005).
India is a hotspot for outsourcing because it has many people who can speak English in an eloquent manner and its relations with America are considered better compared to those of other nations (India Report: Legal Outsourcing and Accounting Outsourcing to India, 2010). Indian economy experienced slow industrialization growth in the period around 1947 because it had import restriction: price restrictions on imports, which imposed high tariffs and subsidized local products. In around 1980, the regulations were relaxed and this steered their industrialization, although the liberation was partial (Chandavarkar, 1998). Indian economy might be the super-power economy in 20 years from now (India Report: Legal Outsourcing and Accounting Outsourcing to India, 2010).