Because of globalization and technological innovations, firms are confronted with increasing competition pressures that are affecting all sectors of an economy. Competition arriving from newly industrializing countries with lower wage costs has had a significant impact on the manufacturing restructuring process in more developed countries. Unable to compete with costs, they have turned to more technology-intensive industries and to more innovative and sophisticated products. Services, until the present, have not been involved in international competition as they have been produced and consumed locally. ICTs have changed this situation, and less-developed countries, notably India and China, have emerged as global suppliers offering standardized and increasingly also more sophisticated services.
Published in Chapter:
Scales and Dynamics in Outsourcing
Iva Miranda Pires (Faculdade Ciências Sociais e Humanas, Portugal) and Torunn Kvinge (Fafo Institute for Labour and Social Research, Norway)
Copyright: © 2008
|Pages: 8
DOI: 10.4018/978-1-59904-885-7.ch184
Abstract
Outsourcing is used to describe the situation where a firm decides to subcontract assembly and/or service functions to an external supplier, either locally or abroad. When activities are subcontracted abroad, the term offshore outsourcing often applies. While offshore assembling activities have taken place for some time, the phenomenon of outsourcing services abroad is quite new. Several factors have contributed to these altered circumstances. First, the development of information and communication technologies (ICT) implies that services can, to a great degree, also be located at arm’s length or elsewhere in the flat world (Friedman, 2005). Second, institutional changes have opened access to new markets for goods and services as well as skilled labor, for instance in Eastern Europe and China. Third, the increased competition through globalization pushes firms to adapt quickly to new contexts and to achieve efficiency in order to maintain competitiveness.