Potential Advantages of Offshore Outsourcing in Business

Lowers labor costs. One of the potential advantages of offshoring is that businesses could save money by hiring foreign workers to do the same ... SkiptocontentBusinessCardsSmalltoMediumAmericanExpress®BusinessGoldRewardsCardBusinessPlatinumCard®fromAmericanExpressMarriottBonvoy™BusinessAmericanExpress®CardAmericanExpress®AIRMILES®forBusinessCardAmericanExpress®AIRMILES®GoldBusinessCardAmericanExpressBusinessEdge™CardViewallBusinessCardsLarge/CorporateAmericanExpress®CorporateCardAmericanExpress®CorporateGoldCardCorporatePlatinumCard®fromAmericanExpressAmericanExpress®AeroplanPlus®*CorporateCardAmericanExpress®AeroplanPlus®*CorporatePlatinumCardViewAllCorporateCardsSupplierPaymentSolutionsAmericanExpressvPaymentAmericanExpressCorporatePurchasingCardAmericanExpressBusinessTravelAccountAmericanExpressBuyerInitiatedPaymentsAmericanExpressCorporateMeetingCardViewallBusinessClassBusinessClassInsightsandInspirationtoHelpGrowYourBusinessManagingMoneyCashFlowFinancingCreatingEfficienciesSuppliersInventoryManagementProductivityAutomationPlanningforGrowthStrategyPeopleBusinessExpansionRisksandControlsInnovationIndustryThoughtLeadershipIndustryInsightsOil&GasConstructionThoughtLeadershipRequestInfoTrendsandInsightsCreatingEfficienciesAugust11,2020PotentialAdvantagesofOffshoreOutsourcinginBusinessAmericanExpressSummaryCostbenefitsaredrivingcompaniestoadoptoffshoring,outsourcing,oracombinationofthetwoinordertostaycompetitive.Moreandmorecompaniesmaybeconsideringoutsourcingandoffshoringtheirworkasapotentialwaytoreducecostsandstreamlinetheiroperations.Outsourcingiswhenacompanyhiresanoutsideorganizationtodospecificjobsorprovideservices.Offshoringmeansabusinessarrangestogetitsworkdoneinadifferentcountry,usuallytotakeadvantageofcostsavings. Manycompaniesmaybeconsideringoneorboth—oracombinationofthetwo,knownasoffshoreoutsourcing—inordertohelpstaycompetitive,especiallyinglobalmarkets. Outsourcingvs.offshoring:Howaretheydifferent? Althoughthetermsareoftenusedinterchangeably,therearesomekeydifferencesbetweenoutsourcingandoffshoring: Outsourcing Thisinvolvescontractingoutworktoathirdparty,whichmayormaynotbelocatedoverseas. It'spossibletooutsourcetoavendorwithoutsendingtheworkoffshore.Forexample,aNorthAmericancompanymayhirealocalaccountingfirmtomanageitsbookkeepinginsteadofhavingitsownstaffmembersdotheworkin-house. Offshoring Thisiswhenabusinessmovessomeofitsoperationsandemployeesoverseas,oftentolessdevelopedcountrieswithinexpensivelaborandresources. It'spossibleforabusinesstosetupoffshoreoperationswithoutoutsourcingthoseprocessestoathirdparty.Forexample,acompanymaymoveitscallcenterstoIndiatoserveitsNorthAmericancustomers. Prosandconsofoffshoringandoutsourcing Thereareadvantagesanddisadvantagesbusinessesshouldconsiderwhenitcomestooutsourcingandoffshoring. Potentialadvantagesofoffshoring: Lowerslaborcosts. OneofthepotentialadvantagesofoffshoringisthatbusinessescouldsavemoneybyhiringforeignworkerstodothesameworkforlessmoneythanitmaycostinNorthAmerica. Establishesnewmarkets. Settingupanoffshorepresencemayenableacompanytobroadenitscustomerbasetoothercountries. Enhancedknowledgeofoverseasmarkets. Foreignemployeesmayofferabetterunderstandingoftheregionaltrends,markets,businessrisksandculturalnormsintheircountrythanNorthAmericanemployees Alternatetaxandregulatorybenefits. Severalcountriesoffertaxbreaksandfinancialincentivestoenticeforeigncompanies. Potentialadvantagesofoutsourcing: Freesupin-houseresources. Byshiftingsomeoftheworkloadtoanoutsidesource,businessescanfocusmoreongrowthstrategies. Lowersoperationalcosts. Oneofthepotentialadvantagesofoutsourcingisthatcontractingoutworkcouldloweroverheadexpensesandtheneedforadditionalin-houseemployees. Providesaccesstooutsideexpertise. Outsourcingofferscompaniestheopportunitytohireavendorthatspecializesinaskilltheircompanylacks. Fasterservice. Aspecializedoffsitevendormayhavethetalentandresourcestocompleteataskfasterandmoreefficiently. Potentialdisadvantagesofoffshoring: Regulatorydifferences.TherearealsoforeignlawsandrisksthatmayimpedestandardNorthAmericanbusinesspractices. Timezones. Workingwithoverseasemployeesmaymeanhavingtomakecallsatinconvenienttimesinordertoreachthemduringtheirnormalbusinesshours. Exchangerates. Thehighsandlowsofcurrencyvaluationcanmakeasignificantdentinoverseastransactionsandmayoffsetsavings. Potentialdisadvantagesofoutsourcing: Securityrisks. Entrustinganoutsidefirmwithsensitivecompanyinformationmayincreasethechancesofasecuritybreach. Lossofcontrol. Delegatingresponsibilitiestoanoffsitevendorcanmakeitdifficulttomonitorprogressandmaintainqualitycontrol. Lackofinstitutionalknowledge. Acompany'sinterestsmaynotalignwiththoseofanexternalorganization,whichlacksthefirm'sin-houseinsights. Intellectualpropertyconcerns. Sharingideasanddatawithathirdpartycanmakeitdifficulttoprotectintellectualproperty. Whatisoffshoreoutsourcing? Oneofthewaystoexperiencethepotentialadvantagesofoutsourcingandoffshoringistocombinethetwo,whichcouldresultinevengreatercostsavings.Offshoreoutsourcingmeansdelegatingcertaintaskstoathirdpartyinanoverseaslocation.Thereareseveralpotentialbenefits: Costsavings. Bycombiningoffshoringandoutsourcing,acompanycouldpotentiallysavemoremoneyifabletotakeadvantageoflowerforeigncostsandlessoverhead. Territorialknowledge. Havingtheabilitytoleverageaforeignworkforcefamiliarwithitsowncountryandmarketscouldbeuseful. Globalcompetitiveness. AsmoreNorthAmericancompaniesexpandoperationsoverseas,offshoreoutsourcingcouldhelpthemremainviableinanincreasinglycompetitiveglobalmarketplace. Currentandfutureeffectsofoffshoreoutsourcing Marketdemandsforlowerlaborcostswilllikelydrivethecontinuedgrowthofoffshoreoutsourcing.Moreandmorecompaniesarealsoimplementingthisstrategysotheycanturntheirattentiontotheircorebusinessandbetterservetheirshareholders. OffshoreoutsourcinghasbeenprevalentintheCanadianITindustry,withmanyfirmsoutsourcingsoftwaredevelopment,networkoperationsandotherITservices.     Thisarticleisintendedforgeneralinformationalpurposesonlyanddoesnotconstitutelegaladviceoranopiniononanyissue.Itshouldnotberegardedascomprehensiveorasubstituteforprofessionaladvice.WanttoDigDeeper?CreatingEfficiencies