Offshore Failure

Topics: Offshoring, Outsourcing, Failure Pages: 3 (903 words) Published: October 7, 2010
OFFSHORE FAILURE (EVERDREAM)
The simple definition of “offshore” in dictionary is a place out of one’s residence. Offshoring enables companies to carry out their business activities in another country to get some financial advantages. One of the advantages of offshoring for companies is being exempt from taxation in mother country. Especially international trade, goods are bought by offshore company from an exporting country and they are sold to 3th country and the profit from that business is collected in an offshore company and earnings are tax-free in the centre of the company located. In globalizing world, companies try to find new strategies to increase their profits in competitive international business arena. The concept of profit in economics is based on two important factors; revenue and cost. Companies can increase their profit either increasing their sales or reducing their costs. Offshoring attracts companies with its advantages. However, sometimes those advantages are overestimated by companies and they ignore the risk elements in offshoring. Specific risks can be various for each offshoring company but they have more or less same type of risks. Generally risks are defined under strategic, geopolitical and project risks. Parallel to technologic development, the number of companies in information technology industry has been increasing and offshoring is common for that industry. Some companies were forced into offshore outsource by decision of their board and almost half of the projects failed (Andy McCue, 2004). According to “The Offshore 2005 research” assessed by research firm Vendoro, out of the sample of 5,231 IT users across the US, UK, Canada and Europe, were quizzed. Based on results of that survey, companies were warned against unrealistic cost saving expectations. When the successful and failed offshore projects were taken into account the average saving was found to be less than 10 per cent, although when the just the successful projects...
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