Offshore outsourcing

From Academic Kids

Offshore outsourcing is the practice of hiring an external organization to perform some or all business functions in a country other than the one where the product will be sold or consumed. It can be contrasted with offshoring, in which the functions are performed by a foreign division or subsidiary of the parent company. Opponents point out that this sends work overseas, thereby reducing domestic employment. Many jobs in the infotech sectors - such as IT, Data entry, and Customer support - have been or are potentially affected.

The general criteria for a job to be offshore-able are:

  • The job does not require direct customer interaction;
  • the job can be telework;
  • The work has a high information content;
  • The work is easy to set up;
  • There is a high wage difference between the original and offshore countries;
  • The work is repeatable.

The driving factor behind this development has been the need to cut costs during the recession following the events of September 11, 2001, while the enabling factor has been the global electronic network that allows digital data to be accessed and shipped instantly, from and to anywhere in the world.

Some of the major countries that provide such services are India (Programming and IT), Russia (Programming and R&D), Romania (Programming and IT), the Philippines (Data Entry and Customer Support), China (Programming), and many others.

The advent of the Internet has enabled individuals and small businesses to contract freelancers from all over the world to get projects done at a minimum cost. This trend runs in parallel with the tendency towards big corporations' outsourcing, and may in the future serve to strengthen small business' capacity to compete with their bigger competitors capable of setting up offshore locations or of arriving at major contracts with offshore companies. See Freelancing on the Internet.

There are different views on the impact on society, which reflects the attitude of Protectionism versus Free Trade. Some see it as a potential threat to the domestic job market and ask for government protective measures, while others (and not just corporations) see it as an opportunity.

See also

External links

For a good discussion, see: The following article is a good informational primer:

  • Outsourcing 101 (http://www.blogsource.org/blog/2004/06/outsourcing_101.html)
  • [1] (http://www.nybanker.com)
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