Why offshore outsourcing?The events of September 11, 2001 in New York severely affected the air-travel sector. All the major airport retailers, including Globshop were hit hard by the drop in passenger traffic. The cash flow crunch, store closures and halting expansion made cost cutting that much more imperative for the firm. These provided the trigger for off shoring IT tasks and realizing significant saving. Less of a financial and operational burden allowed Globshop to concentrate on the core business and leave IT to a specialist company who can provide a better service for a lower price.Financially – Allowed them to reduce their fixed IT cost. As part of the centralisation plan business unit was already being closed but offshore allowed redundancies. Under a flexible/fixed contract Globshop employed ISS for the duration of a project, opposed to employing staff full time, incurring fixed overhead when capacity was not always utilise. Non-financially – the effective firm devoted additional efforts and had a clear agenda to manage user expectationAlternatives: in-house sourcing Onshore outsourcing In-house sourcing: this decision is made after the organization has performed independent benchmarking to determine that its costs and efficiencies are in line or better than those achieved by comparable organizations.The following graph shows the relationship between company size and potential need for outsourcing. As a company reaches 1,000-10,000 employees, the potential need for outsourcing drops dramatically. In organizations of this size, sufficient resources can usually be found in-house to perform a function, as well as having resources to handle backup coverage.Once you look at all the things a company must do to handle a service in-house, it becomes more evident why many companies choose outsourcing versus operating a service in-house. If a service is provided in-house, a company must: * Locate a qualified employee * Train the employee * Pay employee wages and benefits * Provide the employee a physical workspace * Provide the required technology items (computer, phone, Internet access, copier, fax machine, etc.) In some cases, services are required continuous coverage and dedicated resource because responses are generated on a random basis by outside forces, rather than on an internal, controlled schedule. Services of this type would also require coverage during absences of the primary resource, such as: * Scheduled vacations * Unscheduled sick days ……With outsourcing, the company must only: * Locate a reliable and high-quality vendor * Pay the vendor for the services provided
Onshore outsourcing: Onshore outsourcing limits the outsourced work within the locality or the country of origin, but it will not impose as much risk as offshore outsourcing. It brings more benefits to the firm compared with in-house sourcing, but the benefits that the firm would enjoy are not as great and as rewarding as its foreign counterpart.It is a compromise choice Onshore outsourcing Vs. Offshore
* Geographical Advantage
* More comfortable communication ( No culture diversity)
* Same legal rules
The biggest edge over onshore over offshore is its geographical advantage. Onshore outsourcing is only limited to the country of origin, making outsourcing providers more accessible and is nearer to the company itself. There will be no problem with traveling and it makes communication between you and the outsourcing team more comfortable and available. Onshore outsourcing business can help your company save on office space, cost and be more efficient. The geographical limits may just allow you to come in contact with the team every day and supervise their operation. Aside from that, when it comes to intellectual property rights, you and the outsourcing company that you are working with are covered by the same legal rules while in the practice of legality and ownership of intellectual...
Please join StudyMode to read the full document