My opinion on outsourcing and its impact on the prospects of growth of the economy of home Nation and host nation.

Outsourcing entirely lies in relating it to job losses and gains with examining assumptions made by four categories of experts that link off shoring and outsourcing to jobs: 

 Journalists and others that rely on announcements of off shoring by individual firms; market analysts who aggregate future projections by companies 

 Consultancies that take a simplified version of ‘gains from international trade’ to project an overall welfare gain from off shoring and 

 Economists who are aware of ‘the usual theoretical caveats’ in examining the impact of off shoring and outsourcing as trade on welfare, including jobs and wages. 

 Other social scientists who see the main impact of off shoring and outsourcing as the repackaging of tasks within job categories, and the redrawing of boundaries in the system of professions. 

This is an important phenomenon requiring attention by businesses, professional associations, and public policy makers. It is just as important as the commonly made call for policy to deal with the fact that job displacements are concentrated on a relatively few people in comparison to the more dispersed benefit of increased international trade. 

 Opportunities and Threats 

Domestic companies outsource their activities as they believe it is their best interest. Yet, is this really the case how it will effect the home country, the host country and foreign companies? The businesses’ opportunities and threats are outlined. 

Effects of outsourcing 

First of all, outsourcing may result in less demand for highly skilled labour and fewer job opportunities in the home country. As a result there may be a downward pressure on wages, which may discourage students to pursue careers in science and technology. It may eventually result in a decrease in the economic competitiveness of the home country. 

Another point of attention is the loss of intellectual property by transferring knowledge to other countries and, in concrete, to enterprise partners which can use it for their own purposes. This is both a result of advertent and inadvertent knowledge transfer. 

Opportunities 

The availability of well-educated local specialists, combined with low personnel costs (cost advantage), is a supply-oriented incentive to establish abroad. In addition, for huge human resource potential is of great importance. For example, foreign centers in China can import certain equipment tax. In the Netherlands, reduction in labour costs is considered an important factor for Dutch enterprises related to the reduction in the other costs, access to new markets is also quite important for Dutch enterprises, particularly for the ones planning to outsource internationally. In the short term perspective, outsourcing is a perfect opportunity for enterprising people. Many requirements for outsourcing can be demanded by the companies and many specialists will be needed in this area. In this way, there are many support services. A qualified partner can guide in a faster way the process from the conceptualization of the idea to the development of it. This is especially important in Information Technology markets where changes are fast and it is difficult to adapt strategies and product development to such a fast changing market . 

Threats 

Due to lack of transparency in policymaking, industrial, political, legal, technological policies and strategies are very difficult to discern. It is often mentioned that there is insufficient legislation, especially intellectual property rights, and a strong protectionism of regional governments. This provides much uncertainty for foreign activities in home nation. It must be emphasized that receiving promised preferential conditions, such as tax relief and other incentives, can be a stressful and prolonged procedure, due to multiple bureaucratic hurdles and very specific rules. Therefore, a good relationship with the home government is crucial to business efficiency and success . foreign enterprises indicate that legal or administrative barriers, taxation issues, trade tariffs and proximity 

to existing clients are in general perceived as important barriers.  

Yet, due to the cultural gap and language problems, huge potential remains untapped in home nation. Foreign managers come from low context cultures and are used to capture the message meaning with words alone. They believe spelling it out clearly is the only way to avoid ambiguity. 

On the contrary, the Chinese culture is a very high context culture. Here a message is delivered with nonverbal signals, unspoken assumptions, and the context or environment surrounding the conversation. Lack of awareness between high and low context communication styles can lead to misunderstanding, confusion and ineffectiveness. Definitely, the strong influence of home culture will affect the approach to innovation. Concerning the issue of the cultural gap, an extensive training program can enable expatriates to understand the home environment, to develop awareness of cultural differences, and to facilitate their intercultural communication skills. 

At the same time, there can be an increased risk of opportunism under firms who increasingly rely on partnering relations with foreign suppliers, especially where there is need of a proprietary rather than a generic nature. In addition, firms increasingly outsource activities that are crucial to the competitive advantage of the firm. Industries which outsource activities increase their dependence on others. Therefore, outsourcing can become a source of serious bargaining and learning problems in the long. 

Intellectual property rights 

Property rights represent the full range of possibilities by which a firm can protect its ideas, through formal mechanisms (say patenting, copyright and trademarks) and informal mechanisms (say product complexity, secrecy and lead time to market). Still piracy of intellectual property is widespread for which foreign enterprises have expressed serious concerns. The process of starting and winning a patent case is still almost impossible and definitely time consuming. Additional concerns of foreign companies include long patent application procedures and a lack of public acceptance of Intellectual Property Rights legislation.