Offshoring basics: definitions, benefits, and challenges
We hear a lot these days about "outsourcing" and "offshoring." But what do these terms mean, and why are we hearing so much about them? Terminology
First of all, let's be clear on the terminology:
* Outsourcing - "Outsourcing" refers to the transfer of non-core operations from internal employees to an external organization. This transfer of non-core operations allows the company that outsources the work to focus on its core business. The organization that the work is outsourced to will typically have expertise in a given area, allowing it to add value and provide cost savings. For instance, many companies outsource payroll to one of the many available payroll vendors. The payroll vendors are able to add value in the area of payroll in a way that internal payroll departments can't achieve. Another example is human resources departments that outsource background checks to vendors specializing in this area rather than driving to courthouses and checking criminal records themselves. * Offshore - The term "offshore" refers to where the work is being performed geographically. In other words, if a task is "offshored," then the task is being performed in another country. * Offshore outsourcing - "Offshore outsourcing" means that work is being performed by an external company in another country overseas. Many people simply refer to this as "offshoring." Offshoring is taking place all over the world. The more common locations are India, China, the Philippines, Eastern Europe and South America. A derivative of offshore is "near shore" where work from the U.S. is performed in Canada or Mexico. A trend that is here to stay
The current offshore outsourcing trend started in the 1970s when large multinational companies like General Electric began sending manufacturing overseas. White collar jobs such as programming came next and then companies began outsourcing their call centers to overseas vendors....
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