A few weeks ago, when writing about companies shifting call center work back in-house, I touched on how outsourcing affects competition as well as the broader economic impact of jobs going offshore. Recently, I read this letter to the editor in the Fredricksburg Free Lance-Star titled “Why outsourcing jobs overseas is on my company's agenda, too”.

It was great to see the CEO of a non-IT company discuss the competitive reasons for outsourcing its IT. He writes firsthand about many of the same issues and outcomes I have discussed.

There are two levels of impact at play in the dialogue about the economic affect of offshore outsourcing. Business majors may remember taking freshman micro and macro economics. Microeconomics deals with how individuals, households, and firms make decisions to allocate limited resources. This is sometimes called the “bottom up” view of the economy. In this case, the factors affecting a single company in deciding to keep functions in-house or outsource.

Macroeconomics deals with the behavior of the economy as a whole, once all of the individual economic decisions of companies and industries have been summed. Economy-wide phenomena considered by macroeconomics include Gross Domestic Product (GDP) and how it is affected by changes in unemployment, national income, rate of growth, price levels, and balance of payments between countries. This is the top down view. In the case of outsourcing, the impact of jobs moving offshore, growth of the economy in countries outsourcing work and countries taking on the outsourced work, etc.

So let’s look at this letter to the editor first from a microeconomic view and then from a macroeconomic view. Right from the start the author acknowledges the assumed negative macroeconomic impact of offshore outsourcing to the United States, but has made a microeconomic decision in the best interest of his business based on the facts at hand.

We can’t blame anyone for making the best individual decision. Capitalism is based on the fact that everyone will behave that way. Because this company must compete on cost and productivity to survive, it had to make a decision for the best value contrasting costs and service levels delivered. In this case, that meant outsourcing offshore to India. It has apparently received excellent infrastructure run by smart people for a great price.