Outhoring: The Pros And Cons Of Offshore Outsourcing
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INTRODUCTION
Outsourcing is when an organization contracts work out to third parties on the other hand offshoring is to get work done in some different country to lower cost.
Outsourcing work is possible but not offshoring it, for eg., Instead of keeping an in house permanent staff of lawyers that adds to additional cost, hiring from outside law firm so as to review contracts as and when required. Moreover offshore work is possible but not outsourcing it, for eg., Dell customer service which is in India that serves the American clients.
Offshore outsourcing is therefore the way of hiring a vendor or a third party so that the work is done offshore that lowers cost and also gives vendor's expertise & also economies of scale.
OFFSHORING Vs.…show more content… Risks are increased dependence on 3rd parties, difference in interests of clients & vendors, no in-house knowledge & capability etc.
Benefits Cost is lower, work gets completed faster and efficiently Flexible labour, cost effective and specialized knowledge & skill utilization.
Risks and Criticism
Offshoring & outsourcing have both received lots of political criticism that states that they are responsible for stealing in house jobs of people. However economists agree that offshoring as well as outsourcing reduces cost for a company that is advantageous for the customers as well as the economy.
OFFSHORE OUTSOURCING
Offshore outsourcing is a combination of both offshore as well as outsourcing that states that the work is allocated to a third party in a foreign land. It gives benefit of both to the company.
The 4 generations of offshore-outsourcing
Since two decades the relationship between customer and supplier has evolved and so is offshore outsourcing changed over the years. Gen-1
The Gen-1 was "people-centric" and it helped in positioning the potential of the Indian software professionals all around the globe and also helped India to register its impression on global…show more content… It is a "seamless integration" period that is fully "partnership-centric" which also provides comprehensive and end to end solutions to problems of businesses and also leverage their technology.
Industry Trends
Nowadays both offshoring & outsourcing are increasingly being used. Globally the economic recession has always forced most companies to explore the options to increase their efficiency and cut their costs.
Another increasing trend seen in IT services industry nowadays is industry consolidation where larger companies acquires smaller vendors. For eg., EDS was acquired by HP in 2008.
The Hidden Costs of Offshore Outsourcing
IT work outsourced overseas can actually be much more expensive than it looks. Offshore outsourcing is moreover long-term investment rather than a short one and also with a long-term payback.
Some costs associated are: Cost for selecting vendor
An extra 1-10 % on selection of the vendor and some initial travel cost including documentation requirements, evaluation of responses, sending RFPs, legal fees & negotiation of contract. Transition