For nearly one hundred years, the town in which I live was the location of the headquarters and factories of a (for part of that time) Fortune 500 company that was the largest employer in the county. As outsourcing began, the impact upon the community was visceral and apparent at every level. The company is now extinct.
However, the request that "the last person who moves out of town - be sure to turn off the lights" has yet to come to pass. While we have lost many people who have had to move elsewhere to find employment, and while the county unemployment percentage is above the state level, there are a surprising number of former employees who are still in the area, working to develop new businesses based on personal passions or combining expertise to create new companies. The town is still struggling, but we haven't folded yet!
Outsourcing is a massive topical issue for today's businesses, and how businesses respond to this issue will determine their success or not. A key factor is of course context, as each business and the decision they make will be different depending on whether it is cheaper to outsource certain aspects of their business. Also they need to remember public feeling as well. A good example of this is how British companies outsourced a number of their telephone call centres to India but some have reversed this now due to public outcry.
Outsourcing is used to make the most efficient use of resources available. For example, the production of goods that require a lot of labor is usually outsourced as there are several countries around the world where labor is available at a lower cost than in the US. Though it is possible in some cases to automate the production process which reduces the amount of labor required, it may not be as cost effective a solution.
Though outsourcing has come to mean an increase in unemployment in the US and giving away something that rightfully belongs to Americans, this is not entirely true. Lesser developed nations have cheaper labor because the level of education there is lower and they are not as technologically advanced. Developed nations that have the funds and facilities that can be devoted to research and developing modern technology should be doing that. Once modern products have been created their actual production can be moved to out to locations that have a higher level of efficiency in production.
Outsourcing is almost inevitably the result of assuming that outsourcing will be profitable. Financial profit, however, is not the only consideration (although it is almost always the most important one). Sometimes companies suffer in reputation by outsourcing, and a bad reputation can ultimately hurt a company's profit. Thus Apple is trying to deal with the bad PR resulting from the conditions of factories of some of its suppliers in China.
I agree, the decision to outsource is ultimately about the bottom line. Even considerations related to branding (as in the loyalty perhaps engendered by marking a product Made in the USA) is ultimately related to profits. Political considerations, environmental impacts, labor costs, even ethical questions raised about labor conditions, are fundamentally about profitablity. Outsourcing is often profitable for companies, and so they do it.
As the two posts stated, there are many variables. Here are some points to consider. To outsource usually helps the company who outsources, because labor is cheaper overseas. It also helps the overseas country, because they have jobs. However, all is not positive. If products or service are outsourced, then this means fewer jobs for the country that outsources. In light of all of this, I would say that it is best not to outsource in our economic situation.
I have to support pohnpei here. I think that there are too many more considerations which need to be made, and lack of information provided, in order to decide if a company needs to outsource.
There's no easy answer for this. A company has to decide if the benefits of outsourcing (usually financial) outweigh the downside. When a firm outsources, it loses the complete control that it used to have over that aspect of its operations. This can end up causing things like delays in the supply chain that might negate the financial gains.