Outsourcing as the Growth Industry of the 1990s

Firms have come to rely on outsourcing for a variety of reasons. The accelerating pace of technological advancement is the deciding factor for many companies. For this reason, computer consultants such as Electronic Data Systems (EDS), Computer Sciences Corp., and IBM's Integrated Systems Solutions Corp. are among the major players in the outsourcing field. As one outsourcing litigation expert puts it, "People want to buy knowledge, not develop it themselves" (Verity, 1996, p. 47). Although the outsourcing of computer-related functions is not new (EDS has been active in the field since the 1960s), the recent growth rate of the industry is impressive. Worldwide, projected revenues from computer-related outsourcing alone are expected to reach almost 130 billion by the year 2000, up from about 75 billion in 1995 (Verity, 1996, p. 47).

A readers' poll conducted by Nation's Business magazine revealed that 87 percent of its respondents outsource at least some of their business functions. Some respondents outsourced only one function, others outsourced several. The most common functions farmed out related to taxes/accounting/auditing, equipment maintenance/janitor

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outsourcing suppliers employ low-wage, non union workers. GM's Delphi plant has steadily increased its use of outsourcing over the years to save money; the $26 billion-a-year unit was losing money prior to outsourcing. With aggressive use of this strategy, Delphi was about to reduce its number of plants from 50 to 12, with another four facilities earmarked for closure in the future. With the aid of heavy outsourcing, Delphi is once again profitable. As Delphi's president claims, "Delphi was too big. We had too many mouths to feed with limited capital" (Vlasic, 1996, p. 70). When the UAW strike threatened Delphi's profits, GM found itself forced to compromise with the union. GM agreed to offset work lost in the Delphi facilities by adding other new jobs elsewhere. Lately, the UAW has targeted Chrysler Corp. Although the union would prefer a total ban on outsourcing in the auto industry, this demand is unlikely to be met: "Chrysler will zealously guard its right to decide which parts to buy from suppliers . . . GM feels the same way--and then some" (Vlasic, 1996, p. 70). Fleet maintenance is a prime target for outsourcing in many companies because it is generally considered a nonessential service. As one managem
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Approximate Word count = 1623
Approximate Pages = 6 (250 words per page)

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