Pros And Cons Of Offshore Outsourcing Commerce Essay

Western companies will improve their brand name by customer satisfaction and substantial profits by offshore outsourcing. Effect on jobs in the home country– The parent company may have to terminate the employment of its local workers if it offshores their jobs to overseas subsidiaries or hire the services of offshore services providers. This can contribute to a high unemployment rate in the local community where the workers were laid off and affect its economy.

Pros and Cons of Offshore Outsourcing

If your business lacks expertise in this field or doesn’t have enough people to do the job in time, outsourcing electronics design is a wise decision, as this approach has a number of undeniable advantages. Lower labor costs– It is more affordable for companies in the United States to payforeign employees who have lower salariescompared to employees within the country. Offshoring will make a good business practice for business owners if offshore workers can do the same type of work as their American counterparts for much lower labor costs. This is especially important for labor-intensive businesses such as manufacturing and service jobs where reducing labor expenses can help in reducing costs of operations, increasing revenues, and maximizing income.

Offshoring Electronics Design: Cons

Research and development as well as electronics design are among the most commonly offshored knowledge processes, as there are plenty of highly-skilled professionals in some countries. Just as offshore outsourcing combines the benefits, it is also susceptible to the risks of both business practices. Critics claim that these risks are magnified because of the complexity being multiplied.

This is especially true in the case of manufacturing – with China being a leader – and information technology services, with India leading that space. Business process outsourcing is another area of offshoring that has grown tremendously. Technology and skills are transferred from western companies to the emerging market.

Pros and Cons of Offshore Outsourcing

It is also possible to offshore work but not outsource it; for example, a Dell customer service center in India to serve American clients. Offshore outsourcing is the practice of hiring a vendor to do the work offshore, usually to lower costs and take advantage of the vendor’s expertise, economies of scale, and large and scalable labor pool. Offshoring is perceived as yet another way for the super-rich corporate executives to get richer at the expense of individual workers, but offshoring is neither a cure-all for business nor an economy-destroying monster. The financial advantages for businesses are often smaller than first anticipated due to hidden costs. Time zone adjustments– The time zone differences between the home country and offshore country can be a problem for both manufacturing and services offshoring.

In addition, the distance and time gap can make training onerous on your domestic-based team. As a Creative Services leader, you will inevitably need to handle an increased demand for creative support as your company grows or positions itself to drive new revenue streams. Other countries were able to manufacture goods more cheaply than in the U.S. because of lower standards of living and less restrictive laws and environmental regulations. In the wake of the Great Recession and its impact on the labor market, many citizens and lawmakers are questioning the wisdom of offshoring.

Workforce Of Emerging Market Companies

For example, the offshore country needs to make an important decision about a project, but it cannot move forward without consulting with the home country. The time it takes to wait and get a decision could affect urgent tasks that are time-sensitive and deadline driven. There are several best practices that have evolved over the past two decades to mitigate risks and improve outcomes of projects that are offshored and outsourced. One of the most challenging aspects of outsourcing offshore is the complexity of training your overseas resources. Language barriers can make it hard to assess how well your offshore resources are assimilating their training and can lead to quality control issues or decreased production efficiency if your training strategy is not closely managed.

When outsourcing to an overseas resources, you will need to solve complex technology issues to ensure your offshore team has full access to your local servers, DAMs, workflow tools and other networked systems. You will also need to account for the network latency your offshore team will encounter; otherwise, you run the risk of miscalculating your production allocations and missing project deadlines. Language and communication barriers– Many offshoring countries use English as an official language in business and government transactions. But there are differentdegrees in the depth and understanding of knowledgeof English between the workers of the offshore country and their foreign counterparts. The accent can also be a challenge when offshore employees come from a region with a strong local accent and they have to talk to foreigners with distinguished accents.

  • The accent can also be a challenge when offshore employees come from a region with a strong local accent and they have to talk to foreigners with distinguished accents.
  • This is especially true in the case of manufacturing – with China being a leader – and information technology services, with India leading that space.
  • There are several best practices that have evolved over the past two decades to mitigate risks and improve outcomes of projects that are offshored and outsourced.
  • For example, Indian software employees are directly hit by the recession in the USA or UK.
  • Employees are trained with World class design and delivery designs and finally from their experience they are improved in learning intervention.

The «more sophisticated jobs» that U.S. workers are supposed to take on do not exist, and it is an affront to the U.S. worker trained for the «jobs of the future» to have their job outsourced by their American employer. Expatriate assignments can be very expensive, maintenance cost of expatriates in a host country range from three to ten times the cost of domestic employees with similar responsibilities. Employees desire to work in such emerging companies as their payrolls will be high when compared to local companies. These are large companies in which employees professional life grow faster with attractive salary package. Employees are motivated by providing benefits and incentives for a better performance of the company. McDonalds, for example provides potential benefits to its employees and thus retains its employees to work better for more benefits.


The distinctive feature of offshore outsourcing is to provide uninterrupted service in order to meet the different time zones and gain customer satisfaction. Outsourcing to overseas resources can have a negative impact on your onshore team’s morale. Your clients and internal stakeholders may also express concerns that outsourcing overseas will reduce the quality and level of support they are accustomed to receiving. Offshore creative resources almost always deliver significant cost savings over in-house resources or freelancers and are a strategically sound option to consider for production-focused design work.

Outsourcing made sense because specialized companies could provide their services to many client companies at lower costs than the client companies would incur by doing the work in-house. Ultimately, the conglomerates began to collapse under the weight of the acquired companies. Profits started falling, and companies began to retract to their «core» businesses. Next, they discovered that they could shed even core functions by hiring them out to companies that could do them more efficiently and, thus, less expensively. Payroll processing was subcontracted; shipping was farmed out; so was manufacturing; companies were hired for collections, customer call centers, and employee benefits. Availability of skilled labor– Offshoring locations such as the Philippines and India have avast pool of skilled laborfrom which U.S. companies can recruit employees for their offshoring operations.

Experienced Teams

Much of the revenue earned abroad returns to this country in wages for other employees, investment in research and development, profits for shareholders, and taxes for the government. Matt has over a decade of experience leading Creative Services capabilities. As in-house Creative Services leaders, we are constantly striving to balance the different needs and objectives of our clients, our staff and Offshore Software Development our executive management teams. And while we have many strategies at our disposal to help effectively manage these conflicting objectives, there are few as effective–and challenging–as outsourcing projects and resources to an offshore partner. Inefficiency shown in the progress of work and lack of knowledge for which employees expect training for each and every task, thus increases the expenses.

Pros and Cons of Offshore Outsourcing

If you are a business owner thinking about offshoring your company’s business process, the first thing you might ask yourself is “what are the pros and cons of offshoring? ” Other questions you might have in mind are “what are the offshoring benefits and disadvantages? ”, “should you establish a foreign subsidiary or hire an offshore services company?

Work is often outsourced to countries where laws are not as protective of workers and the environment as in the U.S. We ultimately pay for those oversights in human rights abuses and further damage to the planet. The increased tax revenue from corporate profits does not equal the amount lost on U.S. workers’ income taxes. New, more sophisticated jobs will be created in America to fill the void now that the less skilled jobs have been sent overseas. Another trend – especially in information technology outsourcing – is industry consolidation, with larger companies acquiring smaller vendors. It is observed that some companies which emerged has not succeeded due to lack of co-ordination and good relationship with their service provider.

It doesn’t matter where the work is done as long as the U.S. companies earn the profit to return to their shareholders. Unfortunately, like the building of conglomerates before it, outsourcing got carried to extremes. Companies began outsourcing work to the lowest bidder and lost sight of the effect it had on the company in every area except for finances. Offshoring is often blamed during periods of slow job growth in the U.S.

Disadvantages Of Offshoring

Benefits Benefits of offshoring are usually lower costs, better availability of skilled people, and getting work done faster through a global talent pool. Usually companies outsource to take advantage of specialized skills, cost efficiencies and labor flexibility. In the new era offshore outsourcing has emerged as a very important and extensively adapted business strategy.

It can be challenging for the management in both countries to organize shift patterns that are not disruptive for both sides. This can be an issue when both sides have to find an appropriate time to talk to each other. The gaps in communication times could also affect the decision-making process.

Organisations across the globe consider outsourcing as a pathway to avail benefits of cost and effective resources of the country to which work is outsourced. Many organisation s in western markets offshore outsource their activities extensively to emerging market countries where there are location, cost and resource advantages to gain a competitive edge in the global market. The major advantages for western companies by offshore outsourcing their activities would be tax benefits, cheap labour and increased productivity. It enables the firm to lower supply cost by relocating production to countries where inputs and labour costs are lower.

Cultural and social issues– Offshore countries have cultural and social customs that are very different from the countries of the originating companies. For example, an American executive may talk in a candid, outspoken manner while his Filipino employees are more reserved and not used to the frank approach of communicating. Both parties may miscommunicate what they intend to say to each other and this could lead to misunderstanding. Sometimes employees are not motivated properly which results in failure to achieve the assignment goals and thus reported at disturbing levels. It will help improve the economies of poorer countries so they won’t need so much financial aid from the U.S. Companies have an obligation to do what’s best for their investors and shareholders.

If one wants to visit the world and have the capabilities to communicate with different kind of people they have an opportunity to work in such field and thus changes their lifestyle. Based company which outsources all its payroll, service and supply chain control operations to India. Employees who work offshore for this company are given an opportunity to switch their jobs if promoted to a higher level and get a chance to work in U.K. This is regarded as a dream come true for any typical middle class Indian employee.

Dell computers returned its business help desk from India to North America because of an increase in complaints from its customers about Indian employees as they were lacking in solving complex computer problems. Decline in operation and manufacturing process in home country, which leads to loss of jobs and thus create unemployment in one’s own country. When you offshore a development task, security is one of the major concerns. The team you hire may steal some of your ideas, engineering solutions, some parts of the code, etc. A non-disclosure agreement will protect you from theft of intellectual property to some extent , but it’s safer to thoroughly examine your potential partner and read customer reviews before contacting them.

By increase in inflow of FDI by the global company into emerging market the revenue and sales increases thus increase in standard of living. By establishment of Microsoft, IBM and Oracle in metropolitan cities of India, it has enormously resulted in increase in income and spending capacity of people. Offshore outsourcing carries the risk of lower quality products and lower standards because of lack of training and effective controls by home company. The direct relationship between employees and companies are lost due to distance and communication gap. Risk in transferring technology and know-how, this can be copied by its market competitors in the host country. The company faces a potential threat from the employees and competitors as their technical information can be leaked anywhere and spreads like a rapid fire.

Pros And Cons Of Offshoring

For many companies, the benefits of engaging in an offshore production model are numerous and can lead to significant cost savings for your organization while also enhancing your Creative Services support model. Be sure to speak with other creative leaders who have offshored design work to learn from their experiences. Outsourcing services to India is continuously rising because of its various advantages like advanced technology, cheap talented labour, infrastructure and other facilities.

Outsourcing Benefits

Offshore outsourcing combines the benefits of outsourcing, such as easier resource ramp up and ramp down, and more specialized skills; with the benefits of offshoring, such as lower costs and higher productivity. Outsourcing refers to the contracting out of an entire business function, a project, or certain activities to an external provider. This led to more hiring of external providers to manage business functions and projects where specialized skills were required. It is self-evident that you will have to communicate with people belonging to a different culture and whose mother tongue is different from yours. However, many electronics design houses target the global market, so their employees usually have decent English skills and know how to work with foreigners. Moreover, here you can choose between outsourcing the task to a domestic or an overseas business.

Emerging Market Companies

By offshoring electronics design, businesses get access to a valuable resource, i.e. a ready-made team of professionals with vast experience in a given field. There’s no need to build your own crew from scratch, as these people already know each other and work great together. Depending on the complexity of the product you want to develop, prototyping can cost dozens or even hundreds of thousand dollars. Outsourcing electronics design to an overseas developer can be much cheaper due to the lower cost of labor in Eastern Europe, India, Asia, and other regions.

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