Saturday, October 16, 2010

The Economics of Outsourcing

The natural progression of a nation’s economy usually flows from agriculture to industrialization to services. The first two (agriculture and industrialization) can be affected by imports or foreign competition but realistically speaking cannot be outsourced. It is only when the economy enters into the third and definitive stage of services that the law of survival kicks in and paves way for outsourcing.

In a commercial contest of homogeneous service providers, the winner is usually the vendor with the best price. This simple economic principle gets elevated almost to law of nature in a credit starved economy. Jingoistic economic fervor apart all of us realize this simple home truth that if a law firm is able to retain a client by billing him at $X an hour because some of its back office processes have been outsourced then there is no way it can continue to service the same client at $X+10 an hour merely because it has been forced to severe its outsourcing ties given to political interests. The market would simply cease to exist at that price.

The irony of the so called debate around outsourcing is that it’s not new at all. Any time there has been a technological advancement in the forces of production, it has been stoutly met with charges of job elimination. The transition from a farm based economy to an industrialized economy wasn’t a cakewalk either. But people came around when they realized that there was a better way of doing things. That is all there is to outsourcing- it is a better way of doing things.

By mixing issues of trade with politics of nationality and unionism, we only tend to serve political interests and not economic. Outsourcing is not about transfer of jobs from one country to another. It is about creation of value. If legal services can be provided at better prices without compromising at quality then the service providers would find a way- whether outsourcing or some other method.

So this November rather than the resisting the countlessly repeated cycle of change, join us to find out how you can best adapt and grow...

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