The Benefits Of Offshore Outsourcing
Outsourcing specifies the contracting ofa total business operation, a project or some activities to an outside provider. With an increasing company growth and demands for specialized skills, organizations realized the need for delegating work to external providers who in turn were able to complete the work faster and proficiently.
The term Offshoring
The fag end of thetwentieth century witnessed rapid strides in shipping technology plus telecommunicationsframework and it became a resourceful proposition to get the work executed in different geographical regions, more so in developing countries where wages tend to be lower. This practice was termed offshoring.
Captive offshore involves multinational corporations (MNCs) setting up subsidiaries across various nations and getting a wide range of work completed in different lands. The aspects considered by MNCs while offshoring involves expenses relating to production factors like wages, transportation charges, raw material and facilities like electricity. The MNCs also weigh the options of taxes as numerous countries provide subsidies to attract the multinationals to establish their shops and the skills present in the given workforce.
Benefits of Outsourcing
- Organizations both offshore and also outsource because management specialists hold the view that when properly executed outsourcing expands the competitive edge through the division of labor that emerges in a society. Outsourcing proves advantageous to a company due to the following factors:
- Cost benefit
Contracting to a third party is a cheaper option. Costs are often the primary motivation for a company to outsource.
- Concentrate towards Core Competency
A company has a myriad of business functions to perform which may not be “core” to the organization. Operations like human resources, payroll, accounting, transportation, manufacturing and logistics among a host of others are not “core” to an organization. A “core” function is generally one that provides a competitive advantage to a company over its rivals and is the main purpose behind its clients to carry out business with the company. Handling non-core activities are a distraction for many organizations, thus they outsource them.
- Labor adaptability
A company can levitate its requirements through outsourcing. For instance, it may be necessary for a company to hire software programmers for six months to create an application which would be impracticable. Through outsourcing, a company need not worry about employing and firing and can allot the same task to a third party.
Offshoring also extends similar advantages as outsourcing which are namely:
- Cost EffectivenessThe organization generally offshore manufacturing or facilities to developing nations which have minimal wages that yield cost savings. Such savings are transferred to the clients, shareholders and company executives.
- ExpertiseCertain nations offer better competitive benefits through a better pool of talented human resources for a particular task. Like India and the Philippines maintain a huge reserve of English-speaking educated youth and an experienced training infrastructure, making them perfectly suited for BPO (Business Process Outsourcing). Hence, business activities like call centers for customer health are delegated to these places.
The advantages of offshoring and outsourcing largely criss-cross each other, yet their disadvantages are different.
When outsourcing gets mixed with offshoring, the business function is not only to be executed by a third party but is also consented to be conducted in a different nation. The idea behind it is to retain the advantages of both outsourcing and offshoring
Advantages of offshore outsourcing
Offshore outsourcing blends the advantages of outsourcing like easier resource adaptability with expert skills. It also accrues the gains of offshoring like minimal costs and greater productivity. The present trend shows offshoring as the fastest expanding segment of the outsourcing industry.
In fine, organizations are conveniently outsourcing and offshoring greater portions of their businesses, as they recognize it not to be their core function.