- What Flavor Is Given By That Sauce???

 

Anyone might have been in doubt about whether or not their products are real. You may have asked yourself questions like ‘Are my shoes original?’, ‘Did this bag really come from France?’ However, these situations often happen not because of imitations, but because of the differences between the place a product is produced and the nationality of the brand. As trade among and between countries increases, this situation is becoming more prevalent everywhere we live. We call this system ‘Outsourcing.’    
   Outsourcing is the commitment of nonviable services or functions in one corporation to outsiders. It operates due to low management costs and with the purpose of improving efficiency and productivity. American corporations have used this system in the manufacturing industry since the 1980s. It spread to enterprises all over the world. Transaction costs through outsourcing are cheaper than the economic costs of local operations. This is a strategy for maximizing economic effects by concentrating materials and resources to the most potent area and committing the remainder to external firms.
   Outsourcing between countries is called global sourcing or off-shoring. Transporting price competitive components from overseas to reduce the prime cost is practical global sourcing. Global sourcing is especially active in the IT area. Generally, developing countries’ have high-quality human resources related to IT that are moved to developed countries. The companies use outsourcing business management techniques that are engaging in human resources from other countries, remote management and operations through firms specialized in outsourcing.
   According to the UN’s Conference of Trade and Development, world service outsourcing in 2007 will reach 1.2 trillion dollars and service outsourcing industries will be expected raise to 20 or 30% for the coming year. The Financial Times announced that Gartner (organization of worldwide IT market investigation) anticipates that global IT outsourcing will grow continuously in spite of political backlash in the symposium held in Spain Barcelona. The report said about 25% of IT type occupations will move to developing countries from developed countries around 2010.
   With the intensification of global competition, low growth in the economy and diversifying consumer desires make corporations become more innovative. In this situation, outsourcing appears as one of the breakthrough industries. It is indebted to the cheap technology of communication’s development and the large number of engineers in developing countries. The expansion of off-shoring has caused changes in several industries such as call-centers, agency data collection such as medical privacy and handling account data to the Business Process Outsourcing (BPO). BPO involves essential roles like designs in Research and Development (R&D).
   India occupied 44% of the worlds IT outsourcing. In 2005, they earned 17.8 billion dollars and are forecasted to occupy 51% of the IT outsourcing in 2008. Their competitive power is cheap wages, having a good command of the English language and high-quality human resources. In India, twenty thousand students specializing in IT majors are graduating from universities every year. In addition, it is possible to demand outsourcing in labor intensive industries, which are reaching out to value-added industries. However, India was ranked bottom in the infrastructure index among outsourcing countries by McKinsey(conserting company). Moreover, China is rising up as a strong rival. China is focusing more on Deal-Clinching which refers to industries that are politically safety and require technical experts. Their ‘1000, 100, 10 project’ has a goal of selecting ten outsourcing cities, attracting a hundred multinational corporations and raising a thousand midsize and/or large outsourcing service corporations. The Chinese government is raising Dalian as a region of outsourcing service industry. Their aim is at non English-speaking worlds, which India can not deal with. And they have also selected ‘service industry outsourcing’ for the nation’s vision and announced they will not adopt simple processing trades and the manufacturing industry anymore.  
   In the United States, outsourcing is involved in business management topics since the early 2000s and was an issue in the last presidential election (2004). Even private persons are being outsourced to the other countries with cheaper wage competitiveness. For example, Mr. Oiler’s family found an India on-line site ‘Tutor Vista’ while looking for a tutor, who can teach math to his daughter Magon. Oiler’s family decided to use this service because it is cheaper than an academy in the U.S. Magon is given help by using computer messenger. Her teacher Suresh wakes up at 4 a.m. in India for her student in the U.S.
   As wages and job rates increase in India, the leading outsourcing country and multinational corporations in the area of IT are shifting their focus to the Middle East countries. Middle East countries have an advantage of locating between three economic blocs, which are North America, Europe, and Asia. The IT industry has so boomed in the Arabian countries that the demand for Arabic speakers in the world is increasing. However, international conflict makes it difficult to breed human resources in this region. On the other hand, there is an opinion that prosperous condition of Middle East economy, such as the benchmark Dubai, can offset shortcomings.


   Global outsourcing is prevailing in Korea, too. There are many enterprises procuring components from overseas. At least, 70% of domestic enterprises use outsourcing. Most of the enterprises moved some part of their functions like call centers, customer management, and R&D to China and other countries. Since Automobile and electronic products are classified as beneficial industries in the Free Trade Agreement (FTA) with the U.S,domestic components of the business circle are expected to become heroes in global outsourcing.  In order to use human services successfully, they have to study the examples of advanced countries and take interest in financial systems like the goldcard (Giving financial convenience and privileges to foreigners, to attract foreign human resources).
   In addition, the East and Middle Europe are attracting attention. African nations are being given good reputations as a new outsourcing region. The rapid aging of citizens and the rate of labor decreases are cited as reasons for a coming deficiency in the labor market in the United Kingdom. Strict regulations in the U.K also incite corporations to examine foreign outsourcing. However the Confederation of British Industry (CBI) asserts that outsourcing is accelerating the release of high quality human resources and small scale companies to low wage countries. According to the Wall Street Journal, the Organization for Economic Cooperation and Development (OECD) pointed global outsourcing and cheap import items can bring damage to U.S and Europe laborers. Meanwhile, some corporations are cutting down on off-shoring, because they are concerned about quality deterioration. Recently, one world-wide U.S toy company decided to recall its products, because of detection of lead. This platform company, run only through outsourcing did not establishing manufacturing plants in its country of origin, commits most processes to external enterprises. A reason for the recall was management’s failure to establish quality control of products being processed in China. Additionally, the leaking of information is another serious problem. For these reasons  U.S state governments are limiting foreign laborers to participate.
   On the contrary, supporters of global outsourcing persist that off-shoring provides employment, chances for the acquisition of skills to the consigned country. Moreover, unemployed people, because of outsourcing, can create additional values by moving to superior, high-tech industries. Therefore, new revenue can be created to consigned countries. In addition, there are benefits in terms of cost-cutting to consumers and investors.  
   In outsourcing, trust between supplier and outsourcer is very important. So, offering intermediary services and establishing law are necessary. Consigned corporations have to cut the price by increasing efficiency and the rate of engineers used as world export prices are downsizing due to outsourcing. Understanding differences of culture, religion and feeling is also required because outsourcing is distributed culturally.  
   In spite of political disputes, global outsourcing is seen to be widely spreading. In the world wide competitive situation, one corporation, which has limited resources, will have difficulty in maintain a number one.  If one could not use outsourcing, they may die out. Therefore, we can understand how important outsourcing is. Keeping pace with the use of this system, understanding the danger and side effects of outsourcing have to be studied and reformed.

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