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
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.