INDIAN INSTITUTE OF MANAGEMENT
PAPER ON OFFSHORE OUTSOURCING
Rimzhim Mathur (2011IPM082)
Satyajit Behera (2011IPM093)
Pranshu Garg (2011IPM070)
Siddharth Mohil (2011IPM106)
Mridul Bhati (2011IPM051)
“Offshore outsourcing” is comparatively a new research area in international business field. Globalization and accelerated competition as well as ever increasing consumer demand for value have pushed firms to look for new way of value creation through efficient use of limited resources. Offshore outsourcing is one of the way through which the firms try to address the new requirements of the marketplace. However, there exist lots of divergences among the practitioners, politicians, public in general and researchers on the offshore outsourcing concepts, factors and performances. The lack of strong theoretical development has accelerated the debate on the pertinence of offshore outsourcing. However, offshore outsourcing research is gaining momentum in International Business, Strategic Management and Supply chain management field. Through this paper we will analyze each and every aspect of offshore outsourcing.
What is Offshore Outsourcing? The idea behind it:
Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the products or services are actually developed or manufactured. The process can be either completely outsourced or a part of it can be outsourced. For example, a company may manufacture and sell computer parts in the United States yet use offshore outsourcing to handle its customer service and technical support phone lines. The Internet has played a major role in outsourcing to other countries, not only allowing companies to outsource work to other organizations and hire employees that are some distance away, but also making is easier to hire freelance workers from around the world, getting projects completed for significantly lower fees.
Towards the end of the twentieth century, with improvements in shipping technology and telecommunications infrastructure, it became increasingly efficient to get work done in other geographical locations, especially in developing countries where wages are lower.
Offshore outsourcing is generally confused with offshoring. Offshoring usually refers to companies that send whole manufacturing departments or functions to another country. In general, offshoring does not refer to hiring a freelancer for a one-time project to complete a script or website. That process is better described by outsourcing offshore because all that is happening is; a business owner is temporarily hiring an individual from a foreign country to undertake the necessary task. Another major point that should be examined when looking at the differences between outsourcing offshore vs. offshoring is the fact that the employees participating in offshore outsourcing are not always employees of the home company. Company outsources to other companies in another country, but those employees are workers hired by the foreign businesses. Companies that practice offshoring usually have their names on the plants, and therefore, if they reduce the workforce or close the plants, the local people lose their jobs just like the domestic workers did when the companies went offshore.
Although there are many benefits to outsourcing offshore, the idea behind the concept is most always cost. Companies can avoid labor laws and unions in their own countries, in favor of third world countries where the rules are not as strict, and where the people are accustomed to low salaries. However offshore outsourcing performance is not determined by a single factor alone or only on cost-focused measures, it is the correct management of the entire outsourcing process, from the start to the end of the outsourcing process...
Please join StudyMode to read the full document