Chapter 1, Problem 1.7BYP

As noted in this chapter, because of global competition, companies have become increasingly focused on reducing costs. To reduce costs and remain competitive, many companies are turning to outsourcing. Outsourcing means hiring an outside supplier to provide elements of a product or service rather than producing them internally.

Suppose you are the managing partner in a CPA firm with 30 full-time staff. Larger firms in your community have begun to outsource basic tax-return preparation work to India. Should you outsource your basic tax-return work to India as well? You estimate that you would have to lay off six staff members if you outsource the work. The basic arguments for and against are as follows.

YES: The wages paid to Indian accountants are very low relative to U.S. wages. You will not be able to compete unless you outsource.

NO: Tax-return data is highly sensitive. Many customers will be upset to learn that their data is being emailed around the world.

Instructions

Write a response indicating your position regarding this situation. Provide support for your view.