Offshoring: benefits & risks

Ferreira, J., & Prokopets, L. (2009). Does offshoring still make sense? Supply Chain Management Review, 13(1), 20-n/a., pp 1-5, Retrieved from http://search.proquest.com/docview/221135949?accountid=12085

The IT Service industry has expanded rapidly. Many companies worldwide have made the decision to outsource this industry to offshore companies. Worldwide demand has increased growth to 40 to 50 percent on an annual compounded rate basis. Many developing nations like Latin America and Asia have made an attempt to obtain some of the IT offshoring business from countries like the United States because it is seen as not only a source for

In 2004, Global Information Systems, Inc. began to put into motion the consideration of offshoring 3,000 jobs from here in the U.S to company locations in China, India and Brazil. These were highly compensated job positions. About half of GIS is separated into a division known as Global Services Divisions. A considerable portion of GSD’s business came from customers outsourcing their business process needs. GSD began to seek ways to cut costs and improve performance by “offshoring” certain activities in order to present the most attractive value proposition to potential customers.

to be completed by countries who pay their employees as little as 10% of the average earnings in America. Although this is happening in many professions, it is extremely noticeable in engineering with the managers of these large companies hoping to save a net cost of 70 percent (Ron Hira). This strategy, which is commonly known as offshoring, has been increasing in popularity exponentially and there have been many debates as to whether this method of production is a benefit, or a burden. It is uncertain what the overall effect of offshoring will have on the American economy but the workers, namely engineers, should begin adapting.

Offshoring may occur inside the same business and involve movement of work to a different location of that company outside the United States, or to a different company altogether where wages are often lower and other conditions are favorable because they lower a company's overhead. Why do companies decide to offshore outsourcing? The major motivation as any one might suppose is to decrease costs and thus increase revenues. The manufacturing industry cost in the United States is four times higher than in China or India. Conversely, the difference in manufacture is three to one. Employees can be significantly more industrious if they are equipped with the required tools and technology. Also, the lower rate of labor in emerging countries does not matter unless one also takes into account efficiency and quality. The profits of outsourcing American jobs is not only about decreasing costs but also increasing manufacture. But beyond profits and reduction of cost, companies anticipate advancing quality and productivity; decrease the extent of time required to generate new products; and respond to orders, complaints and inquiries from consumers. The loss of jobs was unavoidable after China entered the World Trade Organization in 2001. As part of the treaty

Many developed countries have been outsourcing as a result of which, it has become a common act. Global outsourcing became majorly popular amongst organizations since the introduction of communicational advancements in the late 90s. Now communication ideas and keeping a check on an outsourced office in any third world country is as easy as turning on the light. Sharing of production is not as limited as it seems that organizations now disperse various services and functions worldwide in order to take an advantage in the cost and resources of the market.

The Reshoring Initiative is focused on helping companies shift collective thinking from “offshoring is cheaper” to “local reduces the total cost of ownership.”

Considering human resources deficiency, industries should be dedicated to the core business, and outsource the other less important departments or business to boost efficiency. Globalisation offers enterprises a new category of outsourcing, called offshore outsourcing. Differing from onshore outsourcing, a company utilizes offshore outsourcing for the purpose of decreasing costs and employing experts with high efficiency to economize on the inessential organisations or

In 1973, a monumental shift was prevailing where U.S. companies were sending low skilled jobs within the manufacturing industry to offshore countries to reduce labor cost while maximizing profits. The effect of the jobless manufacturing work force was a shift of those laborers to focus on and perfect the service industry of what it is today (Koch 1). During the high tech recessions of the late 1990s and a nominal expansion of the present time, the Information Technology industry, an industry which through continuous innovations enabled the companies and corporations of America to become more efficient and productive, is also facing the outsourcing similarity with manufacturing. While outsourcing

lies at the heart of business in the modern world and plays an integral part

The requirements of the business environment have determined most companies to focus on reducing their production costs in order to create competitive advantage by reducing the prices of their products and services. Some of these companies have decided to outsource some of their processes to developing countries in Asia, Africa, and Europe. The cheaper skilled workforce in these countries allows companies to reduce production costs.

Further, they point out that even more educated highly trained workers with higher-value jobs such as software engineers, accountants, radiologists, and journalists in the developed world The increased safety net costs of the unemployed may be absorbed by the government (taxpayers) in the high-cost country or by the company doing the offshoring. And when it comes to health and safety requirements it is based upon the company they work and job they do. All of the companies now are recommended the safety measures of their workers. The choice of offshoring destination is often made according to cultural concerns.

Information and communication technologies are of paramount importance in the process of international outsourcing primarily through the technological advancement surge and demand in recent years. Through the rise of Information technology in recent years, the importance of international outsourcing rose significantly. Outsourcing is the contracting of the management and/or execution of a business function to an outside third-party contractor or subcontractor. Outsourcing typically refers to the contracting of services to an offshore, rather than domestic, company. While outsourcing has been an accepted business practice for

Hollinshead, G., & Hardy, J. (2010). The offshoring of financial services: a reassessment. International Journal of Management Concepts and Philosophy, 4(1), 87-99.

The plan of offshoring is of advantages as far as matching the stiff competition in the field is concerned and also disadvantages too. The stakeholders such as the owners, creditors, directors