Economics of Offshore IT Outsourcing: An International Trade Perspective

Abstract

In recent times, offshore outsourcing of Information Technology (IT)\rproducts and services, including software development and\rmaintenance activities, has been an issue of much controversy in the United\rStates, with popular sentiment being against outsourcing in the mass media. Is\roffshore outsourcing really bad for the US economy? If yes, why did so many US\rcompanies, including IT companies, start outsourcing to begin with and still\rcontinue to do so? For that matter, why doesn’t the federal government simply\rban it as a national policy? To provide some possible answers to these\rquestions, this paper examines the issue of offshore outsourcing from the\rperspectives of international trade theory and the unique cost characteristics\rof “information goods”.