What is Offshore Outsourcing?
What is Offshore Outsourcing?
What is Offshore Outsourcing?
Offshore outsourcing is hiring an external organization to perform some business functions in a country other than the one where the products and services are actually developed or manufactured. It is outsourcing your activity to one who is not on your shore or who is beyond your shore. It is a concept in which the buyer of the service is located in some other country then the provider of the service. Simply means, any country other than your own. It can be contrasted with offshoring , in which the functions are performed in a foreign country by a foreign subsidiary.
Offshore
There are four basic types of offshore outsourcing:
ITO Information Technology Outsourcing, category involves the overseas outsourcing of a company's information technology.
BPO Business Process Outsourcing, covers things like running call centers, processing insurance claims.which can include call center management and claims processing.
Software R&D Research and Development, offshore software development falls under this category.
KPO - Knowledge Process Outsourcing, covers things with a higher skill, experience and/or knowledge set such as reading X-Rays, performing investment research on stocks and bonds, handling the accounting functions for a business or executing engineering design projects.
CRITERIA
The common criteria for a job to be offshore-able are:
There is a wage difference between the original and offshore countries;
The job can be telework
The work has a detailed or high information content;
The work can be transmitted over the Internet;
The work is easy to set up, no hassles on internet base set up
The work enable to compete with businesses in other countries.
The driving factor behind the of offshore outsourcing has been the need to cut costs and the enabling factor has been the global electronic internet network that allows digital data to be accessed and delivered instantly, from and to almost anywhere in the world.
Combination of pressures to reduce labor costs, save on operational cost such as payroll, administrative cost, utilities and to improve productivity, and an expanding, economical labor in other countries are the main factors influencing the offshore outsourcing.
FACTORS
Manpower cost,
Manpower quality,
Infrastructure facilities
CONFLICT
There are different views on the impact on the various societies affected, some see it as a potential threat to the domestic job market in the developed world and ask for government protective measures (or at least closer scrutiny of existing trade practices), while others, including the countries who receive the work, see it as an opportunity. This may also takes jobs away from domestic employees and may even hurt the economy. Free-trade advocates suggest economies as a whole will obtain a net benefit from labor offshoring, but it is unclear if the displaced receive a net benefit.
One issue offshoring of technical services has brought more attention to is the value of education as an alleged solution to trade-related displacements. Education may no longer be a comparative advantage of high-wage nations because the cost of education may be lower in the nations involved in the controversy.
While it is true that education is usually considered helpful to competitiveness in general, with low-wage nations may not pay off.
Information technology being in the lead, offshore outsourcing is also helping many industries in manufacturing segments to gain competitiveness. Outsourcing offshore software development to countries like India, China,and Philippines are proving beneficial to the industries world over.
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