...International Bus Mgmt Victor Ebong Turn-in September 13, 2011 Offshoring & Outsourcing 1. Explain outsourcing, offshoring, and nearshoring and give the benefits/costs of each. Why are the benefits of offshoring being questioned more recently? (Reading 1) * Outsourcing- The farming out of work or certain duties to an outside organization. It can be to a company outside the country but in most cases when termed “outsourcing” it is being done within the country. The benefits of this are that jobs are not being lost in a particular territory or country and the work is being done at a more cost effective and efficient rate * Offshoring- Is the wholesale shifting of corporate functions and jobs to overseas territories. This may not necessarily mean shifting of the work to a different organization but rather shifting work to organization’s subsidiaries abroad. * Nearshoring- Is a concept similar to offshoring whereby companies shift operations, often IT related to foreign countries that are close to their own. The major reason behind this is that while gaining the labor cost advantage, many of the same languages are being spoken of the parent corporation. Additionally, these operations allow for travel on short notice without jet-lag. * The benefits of offshoring are being questioned now more than ever because of the extremely high unemployment rates here in the US. Many critics believe that those Americans out...
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...have a very high influence on these activities is India. The purpose of moving an activity to another country has various reasons, for instance trips abroad or high accessibility to skilled resources, but the major reason is to reduce costs of these activities. For that reason India have made a high impact on these activities as of the low wage level. India is in general one of the successful countries when it comes to offshoring IT enabled services. It has for many reasons, but the major factor is India’s cost competitive labor, vast human capital, and their education system, which made them excellent English speakers. Yet, there is still many companies, which have not moved any activity across borders. The reason they have not may differ. As mentioned above some industries have a higher disposition to become offshored, and some activities may not profit from offshoring. However, common for every company that consider offshoring an activity, there will be challenges. The challenges are often caused by the distance, which of course is unavoidable when offshoring. One of the companies, which attempted to offshore an activity to India, was a Dutch company called Baan. The company was founded back in 1978 by Jan Bann. The company back then focused...
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...Offshoring of U.S. Service Sector Jobs Sheila Brown Busb 315 University of Texas Abstract Outsourcing is the agreement of diverse functions, such as data entry, programming, facilities management, disaster recovery, and telecommunications management, to outside providers of services. The main reason why organizations implement outsourcing is cost reduction, to leverage themselves ahead of their competitors, and as a means to increase their adaptability to changes in the business world. Outsourcing also provides the ability to benefit from the advances in information technology, while focusing on core business activities of the organization. Not only does outsourcing information technology functions enable increased concentrated efforts toward the organizational mission, but if skillfully planned and properly managed, contributes to healthy growth in the company’s fiscal bottom line. The implementation of offshoring has affected the competition and the expansion of the business service industry in an increasingly accessible and competitive global world. The effect of Outsourcing Within The Business Services Industry The business service industry has been impacted with intense pressures of reducing costs while also increasing new customers and introducing new products to create a center of attention to those customers. Lately, more companies are implementing offshoring strategies (i.e. outsourcing of operations to foreign countries) to cut costs. However...
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...globe are capitalizing on offshoring to achieve business competiveness. In the last 3 years or so, offshore IT has assumed new forms to include offshoring of business processes. Offshoring of IT is intensifying and firms are strategically leveraging offshore capability and the structural cost savings, while also focusing on deriving operational innovation. Robust models and quality and project management processes are employed to unleash the benefits of offshore IT. The same complexities and challenges still exist, some even growing in their scale and assuming new dimensions. Although many refined and proven managerial and organizational practises and technological tools and infrastructures, are now available, the challenges and constraints involved in managing offshore IT are far from gone. The art of managing offshore IT work is still evolving While there exist tangible and high visibility benefits of offshoring IT operations, they come along with certain riders. We will look at certain hidden costs that have the potential to either reduce savings considerably. Companies that want to succeed in offshoring, shall avoid the below statements. Pursuing the Low-Cost Worker: Offshoring is not only about sending processes to places that will execute at low labour cost. That, today, is no longer the primary reason offshoring is adopted. Quality is of equal or, sometimes, more importance. Businesses, instead, are proceeding with caution and only select offshoring as a strategic option...
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...also an important asset of international growth strategies of many service firms. Bryborn & Jantell (2005) states that every now and then there is a boom of interest in cutting operating costs and every time there is a different ways of how it is done. In the 1990’s, the trends used to cut costs were re-engineering of business processes. However, in the early 2000’s, after the economical downturn, there was a similar trend to reorganize business processes and the trend was called offshore outsourcing. The major driving force for offshore outsourcing are customers who wants more of everything for less money. In MIDAS Bulletin Oct-Dec 2004 publication mentioned that, “ Malaysia is among the top three contenders for offshoring business in the world according to the 2004 Offshore Location Attractiveness Index compiled by the global management consulting firm A.T. Kearney, sources were quoted. Malaysia is ranked 3rd behind India (1st) and China (2nd) but ahead of Singapore (5th), Philippines (6th) and Thailand (13th). In its report, A.T. Kearney considers Malaysia a “ natural choice” for offshore services in view of its low costs, particularly for infrastructure, the most attractive business environment among emerging markets, strong global exposure of the workforce, and government support for the information and communications technology (ICT) sector. Other significant initiatives cited by A.T. Kearney include the government’s investments in infrastructure and...
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...an equal fraction of its total profits. It also included more than half of the company’s 315,000 worldwide employees. A significant portion of GSD’s business came from customers outsourcing their business-process needs. GSD signed multiyear contracts with customers. Most of these long-term contracts were won through highly contested competitive proposals. Competition was against Accenture, Ltd., Electronic Data Systems Corp., Computer Sciences Corp., and Perot Systems. These multiyear billings of some contracts totaled in excess of $1 Billion. Pretax profit margins at the division level were close to 10%. GSD presented the most attractive value proposition to potential customers by cutting costs and improving performances by “offshoring certain activities. The combination of huge capacity expansion and similarly large price reductions in telecommunications made it highly efficient to establish customer service/call centers, software developments centers, engineering design centers, and back-office accounting centers in low-cost areas of the world that had been or were now developing politically and socially reliable infrastructures. IE, India exports of info tech services grew fivefold between 1997 and 2002. Multinational firms headquartered in many of the developed areas of the world were participating in this trend. In Feb 2004, Siemens announced that it was moving 15,000 software programming jobs from Western Europe and the USA to India, China, and Eastern Europe...
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...Offshoring: The Future of American Workers Ericka Bolling Shorter University Abstract Outsourcing is the catchphrase shaking up the worldwide financial environment. Offshoring or outsourcing has changed the way many businesses and individual coexist today. Each person today, respects many aspects of offshoring/outsourcing and we have learned that more organizations are using different assets from offshoring to pick up a business advantage. With the changing worldwide economy, and the inordinate expenses connected with keeping an employees at a staffed capacity, a large number of today's organizations and partnerships are outsourcing the generation of merchandise and administrations to outside firms with an end goal to cut expenses. While numerous experts contend that this can decimate nearby economies by cutting employments at home. There are numerous disservices to offshoring which affects our American workers and families and the practice of offshoring has taken a turn in the direction of an unethical practice. For laborers in the US, various occupations are lost permently, numerous workers need to increase new abilities, due to dimished wages because of the intensity of abroad laborers. Fundamentally, American laborers are presently compelled to contend on a worldwide level, as are organizations in this global commerce. Offshoring: The Future of American Workers Offshoring and outsourcing are words that many use interchangeably. Nevertheless, there are keen...
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...“Outsourcing-Offshore” Outsourcing is said to have emerged a few thousand years ago with the production and sales of food, tools, and other household appliances. As soon as small communities and societies began to form, people with specialized professions began to trade with each other for goods and services. It can be said that each worker was outsourcing some activities to others. Research shows that even in the industrial age, a few thousand years later, very few companies outsourced any of their operations. Companies in the 1800s and 1900s were vertically integrated organizations, taking care of their own production, mining, and manufacturing from raw materials to finished goods as well as then shipping the goods to company owned retail outlets. These companies often handled their own taxes, employed their own lawyers, as well as designed and built their own buildings without outside assistance. This model does not apply to all companies during that time period, but it gives a general idea of the time. The history of outsourcing portrays that as onshore outsourcing continued manufacturing outsourcing of low-tech items such as toys, shoes and apparel goods began to take place. After this manufacturing higher value items like high-tech components and consumer electronics began to appear. In fact outsourcing history demonstrates that manufacturing was the first activity that began to move to offshore destinations in a quest for lower costs. Globalization began during...
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...In response to the article on “Outsourcing Jobs: The Myths and Realities” by Martin N. Baily and Dian Farrell, it surprised me to learn there could be positive effects to the American economy as a direct result of outsourcing jobs overseas. Typically, I have read mostly about the unsatisfactory results that are given attention in the daily headlines. Jobs sent overseas means less jobs here at home; where does this leave the common American worker in the wake of this economic shift? After reading this article, I’m having a difficult time accepting there can be a positive effect to this transition. Since the emergence of outsourcing or offshoring, in the 1990’s, corporations have been implementing the allocation of resources in increasing numbers. In the beginning of this article, it details how much U.S. companies are saving by shipping white-collar jobs overseas. “For every dollar of corporate spending that moves offshore, American businesses save 58 cents. Companies can reinvest the savings in new business opportunities, pay additional dividends to shareholders, or both. Moreover, because wages are lower in the relevant foreign labor markets, companies can hire more (as well as better-qualified) workers to do the same job, and spend more on supervision and training (Baily and Farell, 2010).” This, in theory, sounds like a win-win situation, for both the U.S. and foreign economy where the jobs are being created in. U.S. Companies cut costs, and countries, like...
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...Chapter 13 Off shoring, products have always been a topic of discussion among companies trying to maximize profit. This concept of doing business offshore has both pros and cons and all should be measured to determine what is best for the company both long term and short term. One benefit of off shoring application development is the cheaper labor costs. At the inception of off shoring and outsourcing, supporters of this concept have always noted that lower labor costs will benefit a company with a higher profit margin. Countries that provide off shoring services to the United Stated do not have the higher over- head costs to operate because their employee labor market is significantly lower at cost per hour than employees in the United States are. Keeping in mind the lower labor costs, many companies see that software developers can utilize the same benefits of cheaper labor as other service areas to maximize profit and minimize costs. Another benefit of off shoring application development provided by Clarety Consulting is the less production down time. In this article it is explains off shoring software development allows employees to work on site for 24 hours a day (Advantages & Disadvantages Sotware Developoment Outsourcing). The concept behind this approach to outsourcing is that with access to employees in various countries production on software never has to stop because in every country there is another time zone to begin and start the workday, thus allowing a faster...
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...regulatory standards and transparency differs widely among OFCs. Supporters of OFCs argue that they improve the flow of capital and facilitate international business transactions. ‘Outsourcing’ is the management and / or daily execution of a business function by a third-party service provider. Firms have been encouraged to outsource non-critical areas of business in order to focus on core competences (Quinn et al, 1990). There are many different outsourcing models, including the outsourcing of activities to firms in foreign ‘host country’ locations, which is called ‘offshoring’, and is the focus of this report. Offshoring means located or based outside of one's national boundaries. The term offshore is used to describe foreign banks, corporations, investments and deposits. A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations. In the last five years, offshoring has shifted from being a niche strategy to a dominant...
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...using the visa program for cheap labor. Another concern are consulting companies that bring in offshore consultants. These companies are allegedly using the visa to bring workers to learn skills and then off-shoring the service. Ron Hira, a professor of public policy at the Rochester Institute of technology, has been studying how consulting firms use the visas to help American company cut costs. He says, “What these firms have done is exploit the loopholes in the H-1B program to bring in on-site workers to learn the jobs [of] the Americans to then ship it back offshore.” Indeed, information on Molina payroll indicates that offshore workers in India were paid half the price allotted to Americans, confirming the cost cutting effects of offshoring services. With an expansion in the H1-B visa program, more companies can gain access to foreign workers. Companies would have an incentive to exploit the loopholes in the system for cheaper labor costs. After all, that’s what some companies are doing right now. Expanding the...
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...overall point is to have a positive impact on the employment in terms of the number of jobs created, the salary or wages paid to workers, and it can also be a combination of both (Jansen, et al., 2007). Two other impacts that free trade has on job creation policy is the changes in the distribution, and efficiency of the nation (McConnell, Brue, & Flynn, 2015). To some extent the labor market will shrink while the skill and/or capital industries will increase to a larger size; but all in the countries that have the capacity to sustain economic problems. On the other hand, impacts of outsourcing and off-shoring are similar when it comes to free trade liberalization (globalization) and economic structure. When it comes to outsourcing and offshoring they simply mean the same. For example, in the U.S. many organizations move their accounting, customer service and manufacturing departments overseas to...
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...A critique of “Into the unknown” published by the economist (November 13, 2004.) Fear of losing jobs to offshoring (rise in unemployment), but computers and technology may take these jobs anyway. “Has the machines in its last furious manifestation begun to eliminate workers faster than new task can be found for them?” Article says not to worry. The United States has experienced an increase in the offshore outsourcing (offshoring) of jobs in the service industry. Although offshoring is common in the manufacturing industry, it only recently began in the service industry. The recent increase in the service industry has occurred because of new technology and the ability to access information from anywhere. Those who oppose offshoring believe it takes away American jobs, lower wages, and causes declines in America’s standard of living and any benefits from offshoring are unevenly distributed. Offshoring in the industry has not negatively affected the United States. Currently, offshore outsourcing in the service industry has a net benefit to society and there is no reason for concern. Critics charge that the information revolution (especially the Internet) has accelerated the decimation of U.S. manufacturing and facilitated the outsourcing of service sector jobs once considered safe, from backroom call centers to high level software programming. (This concern feeds into the suspicion that U.S. corporations are exploiting globalization to fatten profits at the expense of workers.)...
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...Outsourcing: The Advantages And Disadvantages Of Outsourcing Advantages of Outsourcing One of the biggest advantages can be lower personnel costs. By outsourcing job duties to non-employees, a business does not have to pay consistent wages or offer additional employee benefits. The company may pay lower taxes because independent contractors, the people who complete the outsourced projects, pay their own withholding, social security, and other taxes. This can add up to substantial savings. Some businesses choose to take their outsourcing one step further by choosing a vendor, located in another part of the world. Doing so typically saves them more money because they end up paying a much lower wage than would be necessary in their home country. The disadvantage is that these vendors may not understand English and communication is more difficult. Many times, outsourcing speeds up production time. Since the third-party vendor will only be concentrating on one specific task, instead of numerous office duties, actual production time can be greatly increased. Outsourcing gives a business the flexibility to change third-party vendors whenever necessary. This process is not as time-consuming as the normal employee hiring process, because they are not screening individuals, they are considering established companies with proven track records. An excellent example of this is customer service. When a business outsources its customer service department, it does not have to hire...
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