Case study reportIntroductionOffshoring is a form of outsourcing where a company moves its business services to another country other than the home country with an aim to cut costs, enter new markets, tap talent that is domestically unavailable or to overcome domestic regulations that prevent specific business activities domestically. History of offshoringMoving jobs to another country from the domestic country started in 1960s in the developed countries. Factories were transferred from developed countries to developing countries. Offshoring has since created a structural change in the developed countries to post-industrial from industrial service society.
There was decrease in transportation and communication costs in 20th century which brought a big difference in paying rates, thus increasing offshoring from countries that are wealthier to less wealthy countries. Internet growth, fiber-optic and World Wide Web reduced costs of transportation for information work, and at some point there were no costs incurred at all. Reading medical data like magnetic resonance imaging and X-rays, call centres, title searching, computer programming, and preparation of income tax are being offshored by the development of internet. One of the poorest countries in the EU in 1990s was Ireland.
US companies started offshoring electronic, software, and intellectual property to Ireland because its corporate tax rates were low. Ireland then became one of the richest EU countries because offshoring helped it create a high tech boom. Production offshoring involves physical manufacturing processes being relocated to country that has low costs. However it is difficult to offshore product design, research and development process which leads to new products because these activities require a skill that is very hard to obtain in cheaper labour regions.
India was the first to benefit from offshoring trend because it has many people speaking English and manpower which is technically proficient. India’s offshoring industry started in the early 1990s. Currently, engineering talent of India has made it an offshoring destination of America high tech firms. Innovation offshoring takes place where companies lets other countries innovate their products to cut on costs, shorten product lifecycle and access talent pool available in those countries. Countries in that are less developed are not utilized for this. In the transfer of intellectual property, when valuable information to the offshore site is transferred, offshoring is enabled.
This information enables remote workers to produce results that are of the same value as the internal employees. Advantages of OffshoringOffshoring has benefits that a company can take advantage of; large talent pool availability, low cost and fast turnaround time. First, offshore countries have large pools of talented and professionals who are motivated. Universities and higher education institutions produce many graduates each year. This makes it easier for companies to have sufficient options to choose from when recruiting for their offshore centers.
This ensures labor for offshoring companies as demand for labour increases. Some countries like India have a large population speaking English which makes communication easier between the customer and the vendor. Most of the time BPO employees in offshore countries work hard and are motivated for the availability of jobs that are well paying and this enables them be satisfied with their work. When a country gets access to the large talent pool and employees who are highly satisfied, employee performance becomes better and thus saving on recruitment costs and training.
This also leads to productive as superior and quality work done.