Globalization is the connection, comingling, and inter-reliability of the world’s resources and labor skills. Globalization has contributed to a ‘flat’ world where the flow of resources and labor is not restricted by traditional national boundaries. Outsourcing for cheap labor in less developed countries – a factor of globalization – negatively affects the professional motivation of workers in the home countries, and experts in fields like engineering will be forced to reduce their wages to stay globally competitive.
Effects of globalization on outsourcing
One of the most significant features of globalization is the increased tendency by organizations and companies to outsource various functions previously undertaken by the organization’s own workforce to reduce labor costs or capture new markets.
Previously multinational organizations would outsource non-core functions, for example, a car manufacturing organization in the US would outsource the rather non-complex manufacturing of headlamps for automobiles to a less developed economy like Mexico in a bid to cut labor costs.
Many companies would also outsource these functions inshore (within the boundaries of the specific organization’s home country) as opposed to offshore (out side the national boundaries of the organization’s mother country (Prasad, and Prasad 67).
The rise in globalization in the last decade however has given way to the practice whereby, organizations are outsourcing even the most core functions to obtain cheaper labor and remain competitive in a world where traditional restrictions towards a single globe-based market in tariffs and taxes are quickly being phased out.
According to Lynn and Salzman, recent trends indicate technology is being spread out equally throughout the world via globalization (12). The authors argue that as a profession, engineers have always been keen to preserve the core functions of their firms and the resultant technology within the mother countries, sometimes going to great lengths to keep secret certain technologies to stave off competition.
However, Friedman rues that, the advent of outsourcing in light of globalization is rendering the hallowed practice redundant and even economically suicidal (146). Countries like emerging global powers Brazil and India are undertaking complex technological works that were previously the preserve of companies based in the US, UK or Russia.
Engineering firms in America are outsourcing dynamic and resource intensive aerospace work to countries in South America like Brazil. Telephone and cell phone manufacturing companies are also outsourcing their core functions to China where labor is cheaper in a bid to stay afloat and remain competitive. India is also slowly gaining prominence as the global industrial center in pharmaceutical drugs manufacturing.
Benefits of outsourcing
Offshore outsourcing does have some benefits for the outsourcing organization. To begin with, it enables the organization to reduce production costs (Rosine, and Daim 880). By acquiring cheaper labor through outsourcing, the organization directly reduces production costs and thus marginally increases its profits. The amount recouped from reduced labor costs is subsequently invested in expanding the organization’s portfolio. Through outsourcing, an organization also increases its ability to compete.
By increasing its presence in new territories, an organization functionally opens up new markets for its products. For example, when Ford Motor Company, based in Michigan in the US, opens a vehicle manufacture plant in India where the labor costs are cheaper, the company will have increased its market presence in the country and its automobile sales in the country will increase.
The organization also stands to increase its shareholder value by enabling the buying of its shares in the country where it has outsourced its services. This observation is especially true when the company or organization outsources its functions through the selling of its franchise or its brand to local investors, or opening wholly independent local manufacturing plants with little control from the mother country of the organization.
Disadvantages of outsourcing engineering works
One of the arguments pushed in support of the dangers of outsourcing engineering jobs is the difficulty in quality control (Bryant 64).This argument is based on the fact that quality control, in some of the less developed countries especially regarding intensive engineering works, may not be as strict and effective as in the developed countries.
This opens a window for malpractices and substandard productions, which may end up seriously affecting the reputation of the outsourcing firm. This may in turn severely affect the business prospects of the organization in the foreign company or continent. For example, Ford Motor Company – which outsources its entire vehicle manufacturing design to various countries around the globe, has had to deal with the recall of some of its vehicle models in these countries due to malfunctioning devices in the vehicles.
Its plant in Brazil had to recall hundreds of vehicles in 2009 due to a faulty accelerator pedal that posed a serious hazard to the safety of the owners of the vehicles and their passengers. In addition, recently, there was a recall of Ford’s vehicles manufactured in China due to faulty devices blamed on substandard manufacturing designs.
The second reason given against the global outsourcing of engineering jobs revolves around the legal framework under which the outsourced jobs will fall. The jurisdiction under which a case of malpractice and negligence will be ‘heard and determined’ poses a challenge. Suing nationals of countries like China and India can be a very tough task since their laws tend to protect the workers from such lawsuits.
Thirdly, insurance companies tend to shy away from insuring the services of a firm and its workers when the business outsources some of its functions.
Conclusion and Recommendation
Globalization and the accompanying processes of outsourcing and off shoring for cheaper labor by Western organizations cannot be wished away. As a matter of consequence, countries like the US and other countries whose workers feel most threatened by the effects of outsourcing need to take the necessary adaptive measures.
The most important step involves the renewed investment in education. Research indicates that many students in the US lag behind Asian students in countries like India, China, and Malaysia in basic mathematical and scientific skills; a fact which will in the future have the overall effect of rendering the country’s labor force less skilled than those in the emerging Asian economies.
Investment in cheaper technological solutions compared with current standards and practices in the markets will help to cushion workers and industry experts from the negative effects of outsourcing.
A total re-organization in the world’s skilled labor force is imminent. Countries that were traditional centers of excellence in fields like engineering, automobile manufacture, and nuclear science among others will have to accommodate ideas and experts from emerging economies like Brazil and India. This shifting in technological labor skills dictates upon the workforce in countries like the US to consider the lowering of professional fees charged in order to remain globally competitive.
Finally, many countries will, in the interim, need to enact laws and regulations that protect the labor skills of their workers. Laws that protect copyrights and patents of products and ideas originating from a country like the US will have to be enforced to protect the skills and innovations of industrial experts in western countries. These experts are subject to cheap imitations from countries like China, which has less stringent copyright laws.
Bryant, Paul. “Decline of the Engineering Class: Effects of Global Outsourcing of Engineering Services.” Leadership & Management in Engineering 6.2 (2006): 59-71.
Friedman, Thomas. The world is Flat: A brief History of the Twenty First Century. New York: Farrar, Straus, and Giroux, 2005
Lynn, Leonard, and Hal Salzman. “The ‘New Globalization Of Engineering: How The Off shoring Of Advanced Engineering Affects Competitiveness And Development.” Economics, Management & Financial Markets 4.1 (2009): 11-46.
Prasad, Anshuman, and Pushkala Prasad. “Moving Out: Toward Understanding the Complexity of Outsourcing in the Age of Globalization.” Business Renaissance Quarterly 2.3 (2007): 67-91.
Rosine, Hanna, and Tugrul Daim. “Managing Offshore Outsourcing in the Software Industry.” Technology Analysis & Strategic Management 21.7 (2009): 881-897.