In a global economy there is an increasing trend of companies looking for cheaper and more effective ways of managing operational costs. The consequence of this strategy has an eventual bearing on eventual profits. Outsourcing is proving to be one of the most recent popular management methods of achieving this objective. As with any management model, outsourcing has success stories as well as its share of failures. Globalization and the increased use of technology have resulted in a highly networked business environment. Cheap and skilled global labor has also resulted in the organizations having the options of reducing their labor costs. The process in which the outsourcing model is implemented and used determines its success or failure.
             The concept of outsourcing is not new. It has existed for a long time, although the scope and the range of outsourcing projects have changed and evolved significantly, in recent times. For instance, in the 1950s and 1960s, to improve profitability, companies based in the Northeast US were setting up manufacturing operations in the right to work states in the South and then later in Mexico. Most of the outsourced jobs in the past were low skilled tasks. This is one aspect of outsourcing that has changed, in recent times. Outsourced jobs are no longer routine and low skilled; rather, the Internet and information technology has changed the manner in which tasks can be performed. In addition, companies are no longer restricted by time constraints and can support round the clock operations. Outsourcing is introducing "transformational outsourcing" where outsourcing activities are introducing changes to business models and processes driving for higher efficiencies and corporate growth.
             The concept of outsourcing is based on the fundamental notion of free trade, first introduced by Adam Smith in his work, Invisible Hand. Smith postulated that self-interest can help individuals and na...