OFFSHORING AND OUTSOURCING

MANY COMPANIES CONSIDER THIS AS A NECESSARY STEP FOR SURVIVING IN TODAY'S FIERCE COMPETITION. HOW CAN YOU ENSURE THAT IT WILL BECOME A SUCCESS?

 

DIFFERENCE BETWEEN OFFSHORING AND OUTSOURCING

 

Although both terms are generally used in a synonymous way, there is a significant difference between them which can create confusion. Outsourcing is the transfer of work to an external company. In case the work is transferred to an external company abroad it is described as offshore outsourcing, i.e. outsourcing which is done offshore. However, if a company opens a subsidiary abroad it is called offshoring production or offshoring services and has nothing to do with outsourcing.

 

REASONS FOR OFFSHORING AND OUTSOURCING

 

   Labor costs benefits in foreign country

   Avoid high investment costs in home country

   Bypass legal requirements and regulations in home country

   Tax benefits in foreign country

   Improving quality and performance through process transfer to experts

   Focus on core competencies in home country

   Entering in new and strategic markets

 

RISKS RELATED TO OFFSHORING AND OUTSOURCING

 

   Expected cost-reductions are not achieved

   Resistance among workforce, e.g. dissatisfaction and fluctuations

   Poor quality and delivery delays by external companies

   Loss of image for the company due to negative reporting

   Failure to comply with foreign laws due to unawareness

   Loss of process-oriented knowledge and skills

   Theft of sensitive data or intellectual property

   Long-term commitment to contracts and investments

 

SMALL ORGANIZATIONS ARE HAVING DIFFICULTIES TO ...

 

   Absorb possible offshoring / outsourcing failure

   Afford best regional business consultants and lawyers

   Setting up own factory / regional office according to internal requirements

   Recruit high-skilled employees to manage operation effectively

   Receive best possible service due to cross-compliance obligations

   Benefit at the same level due to lower production or service volume

   Provide enough expertise and power to deal with foreign companies

 

CONCLUSION

 

Offshoring or outsourcing might become the only option for SMEs in order to survive in an increasingly competitive global market. However, it is important not to rush blindly into any partnership without making use of experienced and competent consultants who are perfectly familiar with the economic conditions in this foreign country.


Are you considering to move your service or manufacturing processes to Southeast Asia but don’t know how and where to start? Then don’t hesitate and talk to us today. Our experts will analyze your situation and strategic goals and identify the key business opportunities and challenges in your industry sector to ensure that your project will become a lasting success.

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