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The single most important tactical reason for outsourcing is to reduce or control operating costs and increase profits. Access to an outside provider’s lower cost structure is one of the most compelling short-term benefits of outsourcing. Foreign countries offer the talents of a college-educated workforce at a fraction of U.S. salaries. Partnering with an organization with world-class capabilities can offer access to new technology, tools and techniques that the organization may not currently possess; more structured methodologies, procedures and documentation, and a competitive advantage through expanded skills. Competing corporations are outsourcing operations offshore to have the cost advantages over the market and to free up management resources. Although outsourcing has achieved cost savings and has been used to enter key foreign markets, these benefits may not outweigh the long-term impacts on U.S. industries and the economy. Large companies such as American Express, Microsoft, Dell, IBM and SAP all offshore outsource to India. All of these companies are very successful and all have excellent profits. When searching on offshore outsourcing India, there are thousands of articles that claim there is a reduction of at least 40% or more in cost and great quality. There are three main reasons that can be accountable to offshore outsourcing to India: 1. Labor – Wages are much lower than American wages, 2. Capital – Infrastructure costs are lower in India then America, and 3. Labor Management – Outsourcing enables companies to do-away with the expenses on bench labor, as the outsourcing vendor allocates the bench employees to projects for other clients or bears the cost of inefficiency.


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