Offshore IT outsourcing involves hiring foreign workers for lower pay to complete IT work remotely. It has become feasible due to the integration of networked devices. India is a popular destination due to its low cost of living, high-quality education, and English proficiency. Offshoring, not outsourcing, refers to companies setting up operations overseas. Offshore IT outsourcing has become a political issue in some countries, with candidates targeting companies that engage in the practice.
Offshore IT outsourcing is the business practice of contracting information technology (IT) for staff who are located in foreign countries and typically work for lower rates of pay. In developed countries, it is common for companies to avoid paying relatively high wages to domestic IT workers by outsourcing work. IT is particularly suited to offshore outsourcing as both programming and software support are relatively easy to do remotely.
It is only in the last few decades that offshore IT outsourcing has become feasible, let alone attractive, for companies in the developed world. The ever-increasing integration of networked devices means workers in countries like India and China, as well as Eastern Europe, can connect to systems around the world, virtually instantly, and do everything but IT work more intricate via the Internet. While physical hardware support, such as replacing a computer hard drive, still has to be done in person, most operating systems and software packages are now developed with remote support in mind.
In technical terms, offshore IT outsourcing only occurs when a business hires outside contractors to complete the work for them. It does not apply when a company transfers part of its operations overseas or merges with a foreign company. It is of a different nature, for example, for companies that have set up their manufacturing operations in Southeast Asian countries, such as Vietnam or Singapore. Such behavior is not considered outsourcing, but rather is known as offshoring.
India is commonly cited as the symbol of the offshore IT outsourcing trend in the Western Hemisphere. India has a great comparative advantage over North American and European countries when it comes to low cost of living and it also benefits from a very high quality of education. Also, English is the primary language of the country. Experienced Indian IT workers can undercut their Western counterparts in terms of wages while still enjoying a good quality of life, in relative terms.
In recent years, offshore IT outsourcing has become a symbol of corporate indifference to domestic workforce and local economic investment. Thus it has become a popular political issue in some countries, including the United States. A growing number of political candidates are running on platforms that highlight job protection and are targeting companies that engage in practices such as offshore IT outsourcing. It is closely related to the global economic issues of free trade, fair trade and protectionism.
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