Sunday, April 03, 2005

Offshoring as Outsourcing

Offshoring is a huge topic these days, and as it impacts HR and I can tie it to outsourcing, I'll write about it. If you are curious, here are a couple of links at Mckinsey (one and two).

For those of you familiar with basic macro-economics (many of us had to take an econ course, I was actually an econ major), offshoring and international trade is basically understood by the production possibility frontier. The PPF states that multiple companies/populations or whatever can produce multiple goods and services more efficiently that a single company/population trying to produce all products and services individually. It's basically the premise of outsourcing. Do only what you are good at and give the rest to someone else who can do it better. Or in the arrogant case of the U.S. keep the high paying jobs and let the developing countries pick up some lower cost jobs (that actually help them develop).