Global outsourcing: effective functional strategy or deficient corporate governance?

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Outsourcing information technology functions has become an increasingly accepted cost‐reducing strategy in both the USA and Western Europe. What these managerial decisions mean in human resource terms is the elimination of high paying employment. In the USA, global outsourcing is now raising public policy concerns about its effects on the nation’s long‐term technological leadership and the ethical propriety of such corporate decisions on a key stakeholder – employees. Global outsourcing is a direct challenge to corporate citizenship (the new corporate governance model) and human capital theory (which recognizes the value of the knowledge worker to the success of the firm) now recognized by many US corporations. While accepting the managerial limits of these approaches, it is argued that corporations and industry associations need to develop and implement a human capital strategy which balances the negative consequences of global outsourcing with corporate citizenship responsibilities to employee and community stakeholders.