Question

Barton & Green is an MNC based in the United States that provides a wide range of software development products. Executives at the firm are considering the idea of outsourcing the company's IT infrastructure. What would best supports the argument that Barton & Green should outsource its IT infrastructure to TMC Enterprises, one of the best IT infrastructure maintenance firms in India?

Answer 1

Outsourcing the IT infraestructure to India will make Barton & Green more competitive because the wages of IT workers in India are cheaper.

Competitiveness comes from the concept of comparative advantage. India has a wage comparative advantage over developed countries because wages there are lower, and wokers are skilled, although on average not as skilled as workers in developed countries.

Outsourcing would save a lot of money in wage costs to Barton & Green, and this will allow the firm to use this money to invest in other areas. This will promote the development of the firm, make it more competitive.