Outsourcing Never Left

The level of public grumbling about American companies shipping jobs to foreign countries may have died down, but the practice of outsourcing hasn't gone anywhere. Depending on how you invest, paying closer attention to this ongoing trend could make you mad, or rich, or both.

Consider IBM (NYSE: IBM), which employs nearly 400,000 people. Its most recent reported U.S. headcount stood at 105,000, down by almost 29,000 workers. That's a 21.5% drop since 2005. But while U.S. headcount has fallen, its total employment numbers worldwide have risen.

"Offshoring" may explain the discrepancy. As Lee Conrad of the IBM employee organization Alliance@IBM told the Poughkeepsie Journal, "IBM wants to hide the information because of their constant offshoring of IBM U.S. employees' jobs to India, South America, and China, at the same time that they have their hands out for tax breaks for job creation in the U.S."

While that's depressing news for American workers, IBM's stock performance suggests that its strategy may be working well for shareholders:

Data: Morningstar.

A strong 2009 return swayed those numbers, but the company's year-over-year performance versus the S&P 500 remains impressive:

Data: Morningstar.

When outsourcing isn't all bad
Outsourcing is likely here to stay, at least for the foreseeable future. But when companies boost their bottom lines with foreign labor, or provide outsourcing to other businesses, opportunistic investors can profit.

Furthermore, not all outsourcing goes to foreign countries. The following companies, U.S.-based and foreign alike, are just some of the many that take on work for other businesses:

Data: Yahoo! Finance.

The big picture
As you can see in the table above, customer service isn't the only task outsourced these days. The trend now encompasses pursuits as diverse as clinical testing, technology design, and medical billing. Mutual fund companies often subcontract other firms to do their research. Some airlines are even outsourcing their pilots!

Still, if you think there's more harm than good in the practice of outsourcing work abroad, you're not alone. Outsourcing has become a major political issue. New laws might attempting to ban the practice in the near future. For now, however, outsourcing remains a double-edged sword for businesses and investors alike.

Does outsourcing hurt or help companies, Americans, and investors in general? Share your thoughts in the comment box below.