Offshore Outsourcing

Topics: Outsourcing, Business process outsourcing, Offshoring Pages: 16 (6800 words) Published: April 13, 2015
The book Offshore Outsourcing by Robinson & Kalakota (2004) defines offshore outsourcing as ‘the delegation of administration, engineering, research, development, or technical support processes to a third-party vendor in a lower-cost location’. Among the examples used in this book, the best is that of the San Francisco–based firm Embarcadero Technologies, which is a leading provider of database and application lifecycle-management solutions in the USA. Embarcadero relies on Aztec Software, another firm with headquarters in California. Aztec Software has an offshore development centre in Bangalore, India, that develops the new integration product, Embarcadero DT/Studio. The entire product lifecycle − from development to maintenance − takes place in India. Aztec’s work on the DT/Studio tool helped Embarcadero to quickly establish a competitive market position for this particular product.

There are many definitions of offshoring as outlined below, but most accept that it generally refers to the process of an organisation replacing services obtained from domestic providers with imported services (Greene 2006; Bhagwati et al. 2004). Offshoring refers to the acquisition of intermediate inputs by companies (or governments) from locations outside the consumer country. “It is the crossing of international borders that distinguishes it from outsourcing in general’ (Kirkegaard, p.4 2005).

Offshore outsourcing can have far-reaching implications beyond those associated with onshore outsourcing. Various authors have made the assumption that the countries that send work offshore are primarily developed nations (Intriligator, 2001; Aspray, Mayadas & Vardi, 2006; Rajan 2004, Kedia & Lahiri, 2007). Most definitions assume that offshoring is directed to developing countries in the interest of saving costs; it was possible to shift the actual production location of services to lowcost countries in a manner theoretically transparent to end-users (Kirkegaard, 2005 ; Chakraborty & Remington, 2005).

The World Trade Organisation (WTO) in its General Agreement on Trade in Services used the following parameters to define offshore outsourcing (Chakraborty & Remington, 2005):
suppliers and buyers remain in their respective locations; moving the service recipient to the location of the service provider; commercial presence of service provider in a foreign country; and temporary migration — seller moves to the location of the service buyer. All definitions are compelling but for the purpose of this thesis, the previously stated definition of offshore outsourcing as ‘the delegation of administration, engineering, research, development, or technical support processes to a third-party vendor in a lower-cost location’ will be used (Robinson & Kalakota 2004). The WTO parameters will also be respected as they expand upon that definition. 2.3 History of IT outsourcing

The history of IT outsourcing is part of IT in that the early time-share systems were a form of outsourcing.
1960s 1970s 1980s 1990s 2000s 2010s
Hardware Software Standardisation
Client Server
Rationalisation Layering
Best of
Figure 2.1: Technical Models and Trends
Figure 2.1 gives an indication of the timeline for technical models and trends by combining charts and information (Willcocks & Feeny, 2006; Zongbin et al., 2006;, Wagner et al., 2006; Lee et al., 2003; A12, 2007 and A9, 2007). In the early 1970s software programming was first moved offshore as software production was easily moveable, since it seldom needed to be committed to a physical medium (Dossani & Kenney, 2004). However, offshore outsourcing as a trend didn’t begin until relatively recently. Since Kodak’s initial decision to outsource the bulk of 12

their IT functions in October 1989, they have outsourced the bulk of their data...
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