offshoring | Definition & Facts - Encyclopedia Britannica

offshoring, the practice of outsourcing operations overseas, usually by companies from industrialized countries to less-developed countries, ... offshoring TableofContents Introduction FastFacts RelatedContent Media Images More Contributors ArticleHistory Home Politics,Law&Government Banking&Business offshoring economics Print Cite verifiedCite Whileeveryefforthasbeenmadetofollowcitationstylerules,theremaybesomediscrepancies. Pleaserefertotheappropriatestylemanualorothersourcesifyouhaveanyquestions. SelectCitationStyle MLA APA ChicagoManualofStyle CopyCitation Share Share Sharetosocialmedia Facebook Twitter URL https://www.britannica.com/topic/offshoring More GiveFeedback ExternalWebsites Feedback Corrections?Updates?Omissions?Letusknowifyouhavesuggestionstoimprovethisarticle(requireslogin). FeedbackType Selectatype(Required) FactualCorrection Spelling/GrammarCorrection LinkCorrection AdditionalInformation Other YourFeedback SubmitFeedback Thankyouforyourfeedback Oureditorswillreviewwhatyou’vesubmittedanddeterminewhethertorevisethearticle. JoinBritannica'sPublishingPartnerProgramandourcommunityofexpertstogainaglobalaudienceforyourwork! ExternalWebsites ScholarsatHarvard-ThePoliticsandEconomicsofOffshoreOutsourcing StatisticsCanada-4EconomicImpactofOffshoring StanfordUniversity-Engineering-ComputerScienceDepartment-TheEconomicsofOffshoringintheSoftwareIndustry By ChristopherO'Leary • EditHistory garmentfactory Seeallmedia RelatedTopics: work ...(Showmore) Seeallrelatedcontent→ offshoring,thepracticeofoutsourcingoperationsoverseas,usuallybycompaniesfromindustrializedcountriestoless-developedcountries,withtheintentionofreducingthecostofdoingbusiness.Chiefamongthespecificreasonsforlocatingoperationsoutsideacorporation’shomecountryarelowerlabourcosts,morelenientenvironmentalregulations,lessstringentlabourregulations,favourabletaxconditions,andproximitytorawmaterials.Theoffshoringofjobsandinfrastructurebecameasignificantfactoringlobaleconomicdevelopmentinthemid-20thcentury.Companiesinitiallyfocusedtheiroutsourcingeffortsonlow-skilledorunskilledmanufacturingjobsandsimpleassemblytasks(seemaquiladora).Bytheearly21stcentury,however,theworkbeingexportedincreasinglyincludedskilledjobs.Ascommunicationstechnologiesadvancedandeducationalopportunitiesincreased,manydevelopingcountrieswereabletoprovidesophisticatedlabourforces.Corporationsaroundtheworldbegantappingthesenewworkerstostaffcustomer-callcentresandtofilljobsinfinancialmanagementandf(IT).IncountriessuchasIndia,thePhilippines,andMalaysia,agrowingpoolofuniversitygraduatesintechnologyquicklybecamecapableofmanagingcomplextasksthatincludedsoftwareengineering,computerchipdesign,andcodewriting.AmajorfactordrivingIToffshoringhasbeenthevastdisparityinbothsalariesandcostoflivingbetweenU.S.technologyworkersandtheircounterpartsinless-developedcountries.Intheearly21stcentury,analystsestimatedthattheaverageIndianITworkerearnedroughly13percentofhisAmericancounterpart’ssalary.Similarfactorsspurredthegrowthofoffshoringinthefinancialservicesindustryandbroughtnewjobsinbanking,insurance,andsecuritiestradingtoaglobalworkforcenewlyqualifiedtohandlethetasks.Althoughoffshoringhasproducedeconomicbenefits,ithasalsocreatedsomeproblems:forexample,workperformedinremotelocationsmayfailtomeetthequalitystandardsexpectedbyaparentcompany;exploitationofworkersmayoccur;andlowerenvironmentalstandards,especiallyindevelopingcountries,maydamagethelocalenvironmentorposehealththreats.Oneofthemorevocalcriticismsofoffshoringoriginatesfromworkersindevelopedcountrieswhoclaimthatthenumberofjobsavailabletothemhasbeenreducedbythepracticeofhiringcheaperlabourinothercountries. ChristopherO'Leary