Introduction to offshoring

Introduction to Offshoring

INTRODUCTION TO OFFSHORING

When companies decide to source work abroad, they often pick jobs that are routine, standardized and easy to learn--things like software support and call-center operation. The thinking is that the easier it is to explain to offshore workers exactly what to do, the more successful the operation will be.

Offshoring is often confused with outsourcing, it is a type of outsourcing. It is mainly done to reduce labor expenses. Other reasons for offshoring could be strategic. It could be a way to enter new markets, tap into talent that is currently unavailable domestically or to overcome regulations that prevent specific activities domestically. (Sourcingmag.com)

Though they may have the same similarities, they are different. Outsourcing is a job that is contracted out to a third party. Offshoring is moving an entire department to another country. This would include Information Technology jobs, call/help center jobs or manufacturing jobs. The reason some of these jobs may be moved is largely due to cost. The cheap labor is only one of many factors that companies to choose where to do business in diverse nations across the world. Major economic changes like the internal growth of emerging markets have scrambled debates about the global economy, posed challenges for international business, stimulated contradictory public policies and confused the general public. (www.theatlantic.com)

Definition of Offshoring

Offshoring has many definitions. Many sources relate offshoring to outsourcing. Below is a few of the definitions various sources, and as you will see, they are very similar.

Offshoring is the practice of outsourcing operations overseas, usually by companies from industrialized countries to less-developed countries, with the intention of reducing the cost of doing business. Chief among the specific reasons for locating operations outside a corporation's home country are lower labor costs, more lenient environmental regulations, less stringent labor regulations, favorable tax conditions, and proximity to raw materials. (Encyclopedia Britannica)

Online Etymology dictionary defines offshoring as ‘the practice of moving employees or certain business activities to foreign countries as a way to lower costs, avoid taxes, etc. (Online Etymology Dictionary)

Shifting a business function from one country to another. For a business, this can entail moving product manufacturing, service centers or operations to a different country. Offshoring is often used to reduce the cost of business, with the company seeking to move parts of operations to countries with more favorable economic conditions. (www.investorwords.com)

Economic