Offshore outsourcing is the practice of hiring an external organization to
perform some business functions in a country other than the one where the
products or services are actually developed or manufactured. It can be
contrasted with offshoring, in which a company moves itself entirely to another
country, or where functions are performed in a foreign country by a
foreign subsidiary. Opponents point out that the practice of sending work
overseas by countries with higher wages reduces their own domestic employment
and domestic investment. Many customer service jobs as well as jobs in the
information technology sectors in countries such as the United States and
the United Kingdom - have been or are potentially affected.
Types There are four basic types of offshore
outsourcing: ITO — Information Technology Outsourcing
BPO — Business Process Outsourcing Software R&D — offshore software
development KPO - Knowledge Process Outsourcing
Criteria The general criteria for a job to be
offshore-able are: There is a significant wage difference
between the original and offshore countries;
The job can be telework; The work has a high information content;
The work can be transmitted over the Internet;
The work is easy to set up; The work is repeatable.
The driving factor behind the development of offshore outsourcing has
been the need to cut costs while 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.
Countries involved Some of the major countries/districts
that provide such services, among many others, are:-
Algeria Argentina
Bangladesh Belarus
Bolivia Brazil
Bulgaria Colombia
Costa Rica China
Cebu Egypt
Estonia India
Indonesia Malaysia
Mauritius Mexico
Morocco Nepal
Pakistan Panama
Philippines Republic of Macedonia
Romania Russia
Ukraine Vietnam
Impact of the Internet The widespread use and availability of
the Internet has enabled individuals and small businesses to contract freelancers
from all over the world to get projects done at a lower cost due to lower wages
and property prices. Crowdsourcing systems such as Mechanical Turk and
CrowdFlower have added the element of scalability, allowing businesses to
outsource information tasks across the Internet to thousands of workers.
This trend runs in parallel with the tendency towards outsourcing in larger
corporations, and may serve to strengthen small business' capacity to
compete with their larger competitors capable of setting up offshore
locations, or of arriving at major contracts with offshore companies.
On the other hand, according to Gartner, it also helped with accessibility to
labor resources across the world, regardless of company size. It gave rise
to business models such as Remote In-Sourcing that allow companies to tap
into resources found abroad, without losing control over security of product
quality. The resulting ability to work remotely and online, will continue to
have a huge impact on the overall development of the global economy, for
small companies and for large corporations.
Source of conflict There are different views on the impact
of offshore outsourcing on the various societies affected, which reflects the
attitude of Protectionism versus Free Trade. Some see it as a potential threat
to the domestic job market in the developed world and ask for government
protective measures, while others, including the countries who receive the
work, see it as an opportunity. In fact, offshore outsourcing has led to Domestic
factories and companies closing down leaving tens of thousands of U.S.
workers jobless while underdeveloped countries such as Brazil, India, Turkey,
etc. begin to flourish. 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. [1] While it is true that education is
usually considered helpful to competitiveness in general, an
"education arms race" with low-wage nations may not pay off.
See also Borderless Selling
Business process outsourcing Free trade controversy
Global delivery model Global labor arbitrage
Globally Integrated Enterprise Guest worker
Labor shortage List of international trade topics
Nearshoring Offshore software development
Offshoring Offshoring IT Services
Offshoring Research Network Outsourcing
Further reading Consulate General of the Kingdom of The
Netherlands Guangzhou. Outsourcing Comparison Study South-East Asia: China,
India, Vietnam 2011-2012. External links
Offshoring Research Network An Atlas of Offshore Outsourcing by
David E. Gumpert Weighing the Benefits of Offshore
Outsourcing - A CIO Research Report by Lorraine Cosgrove Ware
References