Impacts of Outsourcing Services in Australia Essay Example

  • Category:
    Business
  • Document type:
    Assignment
  • Level:
    Undergraduate
  • Page:
    1
  • Words:
    553

The practice and process of outsourcing has expanded as a new business practice. In this case, the core foundation for the outsourcing practice is on the comparative advantage theory analysis. In this case, Costinot and Donaldson (2012, p.92) noted that different markets have a market advantage in producing or offering specific services. As such, the theory argued that in order to maximize the attained economic gains, markets and nations should specialize in the provision of the services and goods they are best at, while sourcing the rest from the other markets. However, although the outsourcing of services and goods had its positive implications, it has a series of negative consequences as well. This section offer s a critical evaluation of the impacts of outsourcing services in the Australian technology industry. The review focuses on both the positive and negative impacts, formulating an analysis of which eclipse the others in the long run period.

The trend of outsourcing IT services from India by Australian firms has increased in the last decade. In this case, a 2013 survey conducted by ITNewcom established that 75% of the organisations outsourced their applications from India, while over 85% outsourced their infrastructure from the same market. When quizzed on the rationale for the high outsourcing rates, the analysis noted that the process allowed for increased operational efficiency (Clarke, 2013). On one hand, the process of outsourcing IT services as well as the infrastructure allows for the concentration of the venture on other core practices. These include marketing and retaining the customer markets in Australia.

As the rate of competition increases and Australia market matures, there is the risk of losing out customer markets if organizations fail to focus and develop its customers respectively. Therefore, a majority of the organisations allow for outsourcing of the IT service as a means of providing the management and employees enough time to focus on the customers and other core product elements such as features and appearance as well as the research and design elements respectively. On the other hand, the Indian market, especially in phones manufacturing technology has two main merits. First, the market has developed IT skills in software and applications development, creating quality applications for the global market. Moreover, the market has a developed IT manufacturing infrastructure that has lower production costs as compared to Australian IT manufacturing firms.

Nevertheless, although this allows for customer focus and reduced IT operational costs, it has a negative implication on the market. First, the Australian market continues to rely on India as its base for IT software and infrastructure. Consequently, this has the ripple effect of transferring the potential for jobs creation and employment in the Australian market to India. This means that the companies deny the domestic market the employment opportunities as well as leaks out the earned profitability margins in Australia to the Indian market (Clarke, 2013). As a result, this has in the past faced increasing public discontent as arguments emerge that the industry has come of age and should focus on in-house systems rather than a majority outsourcing such services.

References

Clarke, T., (2013) Technology outsourcing ‘will continue to increase’. [Online] Available at: <http://www.theage.com.au/it-pro/government-it/technology-outsourcing-will-continue-to-increase-20130429-2iow1.html> [Accessed: 22nd January 2016].

Costinot, A., & Donaldson, D. (2012) Ricardo’s theory of comparative advantage: old idea, new evidence (No. w17969). National Bureau of Economic Research, Melbourne Australia