Offshoring is a term used to refer to the shifting of jobs from wealthier countries to those that are still developing. It is, therefore, a type of outsourcing involving the relocation of business processes of a company or companies to a foreign nation. The movement of a company’s business process or processes to another country may be because of reasons such as favorable economic conditions or lower costs of labor in the other nation. Various companies, therefore, move their product manufacturing or operation and service centers to a different country with more favorable economic conditions in order to reduce the business cost. A company may also decide to have its business functions done in another country as a strategic way of entering new markets, or as a way of tapping talent that is currently not available locally. Overcoming domestic regulations that hinder specific activities is also a reason for companies to offshore (Bardhan, Jaffee, & Kroll, 2013). This essay will discuss smarter ways of offshoring. Offshoring is currently necessary for multinational companies to reduce business costs, and to maintain a comparative advantage in the market all over the globe. Service sector jobs are presently being transferred to developing nations, unlike in the past when jobs offshored were those that dealt with manufacturing. Before offshoring jobs, businesses have to put into consideration factors such as turnover rates, risk, infrastructure, cost, and availability of qualified personnel. Telephone call centers, computer programming, and tech-support are some of the jobs sent overseas to nations such as India and China. In the past decade, most offshore service jobs have been sent to a few cities in areas like Russia, India and Eastern Europe (Schaffhauser,2005). According to Farrell (2006), the rate of turnover among information technology staff in the banking industry has increased in some cities in India. Because of this, it has become hard to hire graduates from prestigious institutes of technology in India.
Hotspot areas for overseas investment banks have witnessed a shortage in the number of qualified personnel for jobs such as reconciling foreign-exchange transactions. The shortage is because of a large number of youths suitable to work in offshore centers that live outside cities currently considered hotspot areas. It is for this reason that firms in Mumbai are worried because of lack of qualified professionals that can work in the firms; hence the rise in wages in areas like Bangalore, Moscow, and St. Petersburg. A recent assessment shows that more than ninety percent of college graduates in low-wage nations that multinational companies can employ reside outside the current hot spots. Some of these young professionals live in cities that are not well known such as Ahmadabad in India, and nations just entering the fray such as South Africa, Argentina, and Morocco (Farrell, 2006).
Several pioneer companies have either recently established or announced to establish offshore centers in Rio de Janeiro, Cape Town, and two others. However, some companies feel uncomfortable locating their first offshore centers in places that have not been tested. To make a logical decision of whether to put up an offshore center in a nation that has not yet been tried out, there is a need for companies to evaluate aspects such as the business environment, the level of skill of the workers, the connectivity, and ways in which the selected locations can meet these aspects. To decide wisely on what location to choose from, companies should consider factors such as trends in wage-inflation, costs of recruitment and future labor supplies (Farrell, 2006).
References
Bardhan, A., Jaffee, D. M., & Kroll, C. A. (2013). The Oxford Handbook of Offshoring and
Global Employment. London: Oxford University Press. Business, I. (2009). Offshoring. Business Basics , 1 -6.
Farrell, D. (2006). Smarter Offshoring. 85-93.
Oshri, I., Kotlarsky, J., & Willcocks, P. L. (2011).
The Handbook of Global Outsourcing and Offshoring. New York: Palgrave Macmillan.
Schaffhauser, D. (2005, January 2nd). Offshoring-What is offshoring?
Retrieved from SOURCINGmag.com: www.sourcingmag.com/what-is-offshoring
