The effects of Globalization on Outsourcing

Factors affecting the current Outsourcing Model

With outsourcing increasingly becoming a way of life in the global economy, the key question for many businesses is how a well managed outsourcing process can translate into business improvement across the board. Suppliers and manufacturers are moving from bringing workers to the work to taking work to where the workers are.

Globalization involves much more than just the popular misconception of cheap labor. There are three trends at play driving global outsourcing
Cost
Education
Mobility.
Everyone understands the process of wage arbitrage through which disparity in global pay can be used to reduce costs of a service or product. Yet this is only the smooth tip of the iceberg.

What we often underestimate is the degree to which secondary and post secondary education has accelerated in providing a skilled base of knowledge workers in other less developed economies. In Japan, for example, less than 1% of the population eligible for university actually attended in 1950. Today that number is greater than 25%. The same sort of shift is occurring today in India and China. This is having a profound impact on the availability of qualified workers for jobs that we would never have considered outsourcing.

The even greater shift is in how easily work can be moved to wherever it makes the most sense. Mobility of work is at least as great a factor in the changing landscape of global trade as the migration of immigrant workers to the new world was in the 19th and 20th centuries. When you combine these three very significant dynamics, it becomes clear that the depth and impact of outsourcing is far more than a passing arrhythmia on the global economic landscape.