European corporations to become more efficient and profit-
able but also globalized and integrated the world economy
in unprecedented ways.
Although outsourcing has long existed prior to the
1990’s, until the late 1980’s most of the outsourcing
work by corporations based in the United States,
Canada, or Europe occurred domestically. Toward
the end of the 1980’s and early 1990’s, outsourc-
ing turned to offshoring technology-assisted white-
collar jobs, qualitatively changing the nature of
business and the structure of the world economy.
Contributing Factors Outsourcing through off-
shoring in the 1990’s was triggered by a coincidence
of several economic and political changes that oc-
curred worldwide. The initial impetus for out-
sourcing information technology (IT) jobs in the
late 1980’s, most of which went to India, was the mil-
lennium bug crisis, also known as the year 2000
problem (Y 2K). Corporations could not cope with
the Y 2K compliance work without external assis-
tance. Also, the early 1990’s witnessed a number of
global economic and political changes that facili-
tated outsourcing. They included the collapse of
communism in the former Soviet Union and the lib-
eralization of socialist economies in India and East-
ern Europe; China’s transition to market capitalism;
the explosive growth of information technology; the
rise of dot-com companies, spurring global entre-
preneurship; and the availability of a large, well-
trained, and inexpensive workforce in developing
nations.
In addition to wanting to take advantage of inex-
pensive foreign labor, global companies turned to
outsourcing in order to keep abreast of the best
practices in areas outside their core competencies
and functions, thereby leveraging their profit-
making capacity and improving customer service. As
a result, during the 1990’s outsourcing quickly grew
into business process outsourcing (BPO), the sub-
contracting of many back-office business functions
that included billing, accounting, finance, payroll,
human resources, procurement, accounts payable,
accounts receivable, collections, customer service,
and call center operations. Because some of these
operations required original research and develop-
ment as well as knowledge management, some have
used the term “knowledge process outsourcing”
(KPO) to describe some aspects of the process. The
nations that served as major destinations for out-
sourcing in the 1990’s included India, China, the
Philippines, Vietnam, Dubai, Hungary, Romania,
Poland, and Mexico, where skilled technical labor
was available at relatively cheaper rates. Among
them, India soon emerged as the leader, thanks to its
large pool of highly educated, English-speaking en-
gineers, technicians, and entrepreneurs.
Impact The success of outsourcing convinced
global companies that virtually every business pro-
cess could be outsourced in order to create value for
customers, to increase market share, and to achieve
innovation. For instance, International Business Ma-
chines (IBM), which was on the verge of collapse in
the early 1990’s, reversed its decline as a result of
outsourcing many of its operations to India, where it
also found new markets. With its substantial invest-
ment and a large Indian workforce, IBM launched
its expansion to other developing countries, includ-
ing China, Brazil, and Russia. Through outsourcing,
companies also learned that their success depended
on pursuing their core competencies and specializa-
tions while shifting the burden of routine manage-
ment tasks to others who specialize in such opera-
tions. Some companies outsourced a single business
process such as customer service, while others
outsourced multiple processes that included human
resources, finance, and accounting. During the
1990’s, the typically outsourced BPO was human re-
sources.
Subsequent Events Since the 1990’s, outsourcing
has affected areas beyond businesses. For instance,
higher education has recognized the need for inter-
nationalization in areas such as business, engineer-
ing, information technology, and cultural studies. As
companies move their operations from country to
country seeking greater value and profitability,
there is pressure on skilled and white-collar profes-
sions in the United States and Europe to innovate.
Outsourcing has spurred such innovation not only
in client countries but also in the provider countries
such as India and China.
The success of outsourcing through offshoring
has caused controversy. Concerns have been raised
about the loss of jobs in the United States and Eu-
rope as companies began to ship jobs abroad. Some
have questioned the wisdom of sharing technology
and equipment with countries such as India and
China that are potential competitors to the United
States and Europe. Others are concerned aboutThe Nineties in America Outsourcing 655