When a company contracts another company to offer or provide service, which otherwise can be provided from within the company then it is said to be outsourcing. According to Greaver (1999) “Outsourcing is the act of transferring some of an Organization’s recurring internal activities and decision rights to outside provider, as set forth in a contract (P. 3). Companies outsource their work and services like call centre and other services like e-mailing. Separate company which specializes in these service are the mandate by the outsourcing company to undertake these services on it’s behave at agreed fee.
A company may outsource to a local company or even to an oversea company depending on the factors put into consideration when outsourcing. Outsourcing has become a common practice around the globe. India is well for outsourcing services and in our discussion in this paper we will focus on the recent relationship between the US and the India outsourcing problem.
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The basis of outsourcing varies from one company to another, but there is one fact of saving money which seems to be common reason of outsourcing. It is believed that many companies that offer outsourcing services are in capacity of doing so at fairly less price because they have fewer overhead expenses. Also outsourcing makes good sense for small and medium-sized business that can’t afford to do every thing from within may be because they lack the skills or resources (Weinberg, 253).
According to Davis Media inc, India is the most competitive and popular technology outsourcing destination in the world in 2005, according to the global outsourcing report and China is will be number one technology outsourcing country in ten years time. The global outsourcing report ranked countries based on the opportunities, costs and risks they present for IT outsourcing currently and even in future. The report continues to say that despite the sensitive political issues around offshoring, the strategy gives big corporate benefits in terms of productivity, prices, profits and wages.
Analysts have reported that development of India outsourcing sector is highly optimistic and it will slow down in future. This is due to the fact that both IT and Business Processing Outsourcing (BPO) sectors in India are extremely dependent in USA and thus if US dollar goes down in value the whole sector will be affected. In addition there are competitors with cheap services. Some of emerging competitors of India in outsourcing services includes; China, Mexico and even Vietnam which expanding there outsourcing services.
The relationship between USA and India is very crucial for the outsourcing services in India. With the fact that India outsourcing services holds its basis of initiative from USA, the relationship between the two countries is very important because it highly determines the growth and sustainability of the service.
According to foreign policy experts, the relationship between USA and India was slightly affected by election of Barrack Obama as USA president. Basically this happened due to the Obama’s administration intentions of develop relation with China and Barrack’s protectionist considerations on dealing with the economic crisis. However both leaders from these countries have denied these concerns.
Historically USA and India enjoyed a very warm relation. One remarkable event was that of Swami Vivekananda who introduced Yoga and Vendata to America. Vivekananda went to USA, where he brought out eastern thought of the world’s parliaments of religious, in relation with the world’s fair in Chicago in 1893.
From economic perspective USA is one of India’s large direct investors. For the period of thirteen years from 1991, the stock of FDI inflow has extremely gone high from USD $11.3 million to $344.4 million, summing to $4.13 billion, which is a compound rate increase of about 57.5% yearly. India on here side started making direct oversea investments in the year 1992. Policies were adopted which allowed Indian corporations and registered partnership firms to invest in businesses up to one hundred percent of their value. The largest outgoing investments for India are manufacturing, which takes about 55% of the country's foreign investments. The second largest are non-financial services (software development), with about 36% of investments.
The United States is also India's largest investment partner; Americans are believed to have directly invested $9 billion which can be reflected as 9% of the total foreign investment into India. Also Americans have notable investments in India's sectors like; power generation, telecommunications, Transport, petroleum processing, and mining industries
India and USA have discussed matters which can lead to break into the accounting market. In the effort of facilitating the same Indian companies have been granted licenses for telecommunications industry and also the two countries have put in policies to enhance interaction of their companies. This has enhanced the exchange of valuable information acknowledging professional services offered by the countries, for example outsourcing services from India.
Also policies were set to ensure that, there were no restriction of investment in industries such as finance and insurance. The outsourcing services from India were viewed as means of boosting and promoting business between the two countries. USA exports thing like aviation equipment, engineering materials and machinery to India. This process is mostly done via internet and communication which is done in call centers.
The relationship between the two countries is said to have been gained much during president bush administration. It deteriorated after president Bush handed over to Barrack Obama. This is evident because even during the tour to Asia by USA secretary of States Hilary Clinton, in early 2009, India was not among the countries she visited. Foreign policy magazine reported that despite the fact that foreign policy staff of the previous administration had suggested India to be the key stop during any tour to Asia, Hillary struck New Delhi from her itinerary. The exclusion of India was explained as a mistake by some analyst. Also India was not acknowledged or mentioned in the president Obama administration’s official foreign policy agenda.
The way Obama administrated began handling ties toward India raised a lot of concern of downturn of India-America relations. Also it has been suggested by national interest that Obama administration can damage the foundation of the underlying business partnership between India and America. Many people have been calling upon the president Barrack Obama to consider the importance of India-America relationship and especially from business perspective.
In what is believed to be the attempts of strengthening the relationship of the two countries, USA secretary of States Hillary Clinton visited India toward the end of 2009. In her speech which praised India, Hillary called India a “key partner” of United States and said United States wanted India to succeed as an “anchor for regional and global security” In her speech she also mentioned how USA plans to build good USA-India relationship, in order deal with; global security, economic activities, human development, and science and Technology.
The approaches in which Obama administration dealt with Taliban insurgency in Afghanistan and Pakistan is said have strained the USA-India relationship. In fact India’s National security adviser blamed Obama administration for associating the Kashmir dispute to the instability conditions in Afghanistan and Pakistan. He said that by Obama administration doing so it was nothing else but ruining the relationship of the two countries.
More divide between the two countries was also seen when India decided to turn down USA invitation to attend conference on Afghanistan. Since the bombing attacks in Mumbai in 20008, it is said that the public mood in India has been to pressure Pakistan more assertively to act against the culprits who were behind the attack and this is believed to have been reflected in the general election which was conducted in 2009. Also analysts say Obama administration might find itself at odds with India’s inflexible stand against terrorism.
From perspective of strategic and military relation, Obama administration is said to have cleared US $ 2.1 billion on March 2009 to India, the largest military deal ever between the two countries. India raised her concerns that USA administration non-military to Pakistan should not be used to counter-insurgency, rather to build its military against India. It was also argued that Obama administration was going slow on full implementation of the Indo - US nuclear deal. On the other side Obama administration has emphasized on the strengthening of the comprehensive Test Ban Trealty and has been pushing India to sign the agreement. But special envoy, Shyam Saran of India has “cautioned” the United States that India will keep on opposing any such treaty because India is a “discriminatory”.
It is fact that USA technology companies in previous years have benefited from outsourcing their work to lower operations in India. The cost merits of outsourcing have been given priority in many corporations in United States. The debate of outsourcing has intensified as technology companies continue getting higher profits and reducing production cost by sending technical support, software development, quality assurance and other functions to India.
Technology companies require a global work force to compete. However it has been said that the current wave of outsourcing adheres to a trend that initiated when international barriers began to tumble in the 1990s. But this seems not to be the case to many American who are left jobless when their companies outsource their jobs to India.
In conclusion both United States and India have benefited from the outsourcing services. United States has minimized her cost on production, saving more time while India has benefited by job creation to her citizen who offer the service. It is there fore generally agreeable that good relation between the two countries is of mutual benefit.