Who Benefits from Outsourcing?
The Political, Economic and Cultural Ramifications
Of Outsourcing
WHITE PAPER
Who Benefits from Outsourcing?
Table of Contents
Executive Summary……………………………………………………………………………………………………………………..3
Outsourcing andOffshoring: Good forPolitics?……………………………………………………………………………….3
The Economics of Outsourcing and Offshoring………………………………………………………………………………..4
Managing Cultural Differences and Limitations……………………………………………………………………………….6
So Who Benefits from Outsourcing? ………………………………………………………………………………………………7
Conclusion………………………………………………………………………………………………………………………………….8
About Intetics……………………………………………………………………………………………………………………………..8
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Copyright 2009 Intetics Co. | intetics. com
Who Benefits from Outsourcing?
Executive Summary
While simple on the surface, the decision to outsource is a major strategic undertaking for most
Companies. Since it involves evaluating the probable reduction in costs against the consequences of a
Loss in control over production or performance of a certain business function, the opportunity to
Outsource and offshore should never be taken lightly. There are also other considerations – economic
Effects, political consequences, and even cultural limitations. So who really benefits from outsourcing
And offshoring when there are so many issues and constituencies involved?
This White Paper explores the economic and political implications of outsourcing and offshoring, while
Identifying cultural differences that can make or break a sourcing relationship and examining techniques
For managing successful deals.
Outsourcing and Offshoring: Good for Politics?
A simple search of the Web produces endless reports on the pros and cons of both outsourcing and
Offshoring. However, there is one important issue that most articles, White Papers and even academic
Studies neglect: how outsourcing and offshoring affects political relations. What happens when one
Country sources processes and jobs out to another?
In 1750 the economic philosopher baron de Montesquieu wrote in his L’Esprit des Loi, “Peace is the
Natural effect of trade.” Since outsourcing is generally accepted as a modern-day form of trade, the
Practice should promote closer political ties between countries. And when countries are closer
Politically, they have a tendency to work together cooperatively with less conflict. These statements are
Supported in a paper written by Solomon W. Polachek with the State University of New York at
Binghamton and IZA Bonn. He answered the question “How does economic interdependence reduce
International conflict?” with the following summary:
“Trade promotes peace because the disruption of trade brought on by conflict makes warfare and other
Hostilities more costly. Thus, if conflict leads to a diminution of trade, then the cost of conflict (all else
Constant) is the lost gains from trade. The higher these gains from trade losses, the more important is
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