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Offshore outsourcing is an increasingly popular phenomenon that can be viewed as another

form of international free trade. The concept of outsourcing stems from the idea of comparative

advantage which suggests that individuals, firms and nations are better at producing certain

goods and services and thus must concentrate on producing those over others. This form of

trade allows countries to specialize in producing narrower ranges of goods, thus giving them

greater efficiencies of large-scale production.

The most notable outsourced divisions within a company have been customer support/call

centers, accounting, human resources and manufacturing. Outsourcing often refers to thedelegation of non-core operations or jobs from internal production to an external entity

specializing in the management of that operation. The decision to outsource is often made in the

interest of lowering firm costs, redirecting or conserving energy directed at the competencies of

a particular business, or to make more efficient use of worldwide labor, capital, technology and

resources. Outsourcing is easy to be replicated, and therefore, it is not a source of sustainable

competitive advantage. Outsourcing provides certain competitive advantages to early-movers

that is, to companies that adapt it first but it isnt proprietary. It cannot be patented,

preventing others from adapting it. Outsourcing can thus revive mismanaged areas of the

business set up.

While we can prove that outsourcing has had a positive affect on short term economic growth,

the long term effects are yet unknown and may prove destructive. By outsourcing jobs of highly

skilled workers, knowledge is unavoidably transferred to other economies. This spillover

creates clusters of growth that have the capability of competing with our corporations in future

years.There is still a lot we do not know about outsourcing, largely because the available datadoes not provide information needed to fully understand its magnitude, the reasons behind it,

and the actual effects it has on the economy.

However, there is still substantial information that can be examined to analyze the long-term

consequences that will alter our economic status The sudden increase in outsourcing highly

skilled professional jobs may be suspending our competitive position in the world as an

economic power.

Outsourcing often leads to the fragmentation and disintegration of the supply chain, inviting new

competitors into the industry, and undermining pricing power and profitability. Outsourcingsunintended consequences extend to company relations with another partnerthe customer. If

each and every activity is outsourced, customers may feel betrayed.

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Companies must realize that their strategic advantages will thrive based on maximizing their

knowledge-base, which is achieved through employing highly educated U.S. workers. It

certainly exerts long term impact on nations educationsystem, as well as on the privacy and

security of outsourced data. Some questions that the corporate management needs to anaswer

are:

How would be manage in times of economic recession in that nation?

How to bear the compromises on standards

How to tolerate the lack of Flexibility

How to sustain competitive advantage and the business model working?