...Into the Practice of Offshoring DEFINITION According to the book Fundamentals of Human Resource Management, offshoring is the practice of “moving operations from the country where a company is headquartered to a country where pay rates are lower but necessary skills are available” (Noe et. al. 41). The practice of offshoring in the United States dates back to as far as 1970s. It begins with the practice of outsourcing, which, according to the book is “the practice of having another company (vendor, third-party provider, or consultant) provide services” (Noe et. al 40). By outsourcing work to a third party which actually specializes in the field of service, a company will be able to operate more efficiently and focus more on their core competencies. Offshoring is the short for ‘offshore outsourcing’. In offshoring, not only is the work being performed by another company, it is also being performed overseas. As globalization becomes a recent trend and people can easily communicate and send information through the internet, most companies nowadays are practicing offshoring. Instead of hiring workers from inside the US, companies are recruiting their employees from a global workforce and moving their operations overseas to look for talented people who are willing to work just as hard (or even harder) for a lower cost. BENEFITS AND DISADVANTAGES Most companies who practice offshoring admits that cost saving is the number one reason for them to move jobs overseas. Stephanie Overby...
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...13, 2011 Offshoring & Outsourcing 1. Explain outsourcing, offshoring, and nearshoring and give the benefits/costs of each. Why are the benefits of offshoring being questioned more recently? (Reading 1) * Outsourcing- The farming out of work or certain duties to an outside organization. It can be to a company outside the country but in most cases when termed “outsourcing” it is being done within the country. The benefits of this are that jobs are not being lost in a particular territory or country and the work is being done at a more cost effective and efficient rate * Offshoring- Is the wholesale shifting of corporate functions and jobs to overseas territories. This may not necessarily mean shifting of the work to a different organization but rather shifting work to organization’s subsidiaries abroad. * Nearshoring- Is a concept similar to offshoring whereby companies shift operations, often IT related to foreign countries that are close to their own. The major reason behind this is that while gaining the labor cost advantage, many of the same languages are being spoken of the parent corporation. Additionally, these operations allow for travel on short notice without jet-lag. * The benefits of offshoring are being questioned now more than ever because of the extremely high unemployment rates here in the US. Many critics believe that those Americans out of work are due in large part because their would-be jobs are being shipped...
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...regulatory standards and transparency differs widely among OFCs. Supporters of OFCs argue that they improve the flow of capital and facilitate international business transactions. ‘Outsourcing’ is the management and / or daily execution of a business function by a third-party service provider. Firms have been encouraged to outsource non-critical areas of business in order to focus on core competences (Quinn et al, 1990). There are many different outsourcing models, including the outsourcing of activities to firms in foreign ‘host country’ locations, which is called ‘offshoring’, and is the focus of this report. Offshoring means located or based outside of one's national boundaries. The term offshore is used to describe foreign banks, corporations, investments and deposits. A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations. In the last five years, offshoring has shifted from being a niche strategy to a dominant...
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...Kristen Valla BBMBA 9111 Case Study 1 Offshoring at Global Information Systems, Inc. Background/Overview In 2004, Global Information Systems, Inc. began to put into motion the consideration of offshoring 3,000 jobs from here in the U.S to company locations in China, India and Brazil. These were highly compensated job positions. About half of GIS is separated into a division known as Global Services Divisions. A considerable portion of GSD’s business came from customers outsourcing their business process needs. GSD began to seek ways to cut costs and improve performance by “offshoring” certain activities in order to present the most attractive value proposition to potential customers. This case examines the issue of offshoring high-tech jobs different perspectives. The topics presented include determining the stock price effects of offshoring, examining the economic consequences of offshore work for both transmitting and receiving countries, when the consequences of non-competitive offshoring, and thinking about the challenge of investing in a career that is vulnerable to future offshoring. Opportunities/Challenges GSD has programming centers established in Bangalore, India; Shanghai and Dalian in China as well as Sumare, Brazil. That being said, with profit being a company’s number one concern, GSD could only consider the possibility of replacing jobs here in the United States with jobs offshore. The dollar amount of savings would be staggering. When all is...
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...2012 Offshoring: The next industrial Revolution? Summary The article consists of the idea that the third industrial revolutions is coming within the next couple of decades. Economists believe that this in merely an international business as usual, and that it will improve each nation comparative advantages. This revolution will not include shifts from the agriculture to the manufacturing, nor the manufacturing to the service sector, but will consist of offshoring of service jobs from the richer countries to the poorer ones, since the labor is cheaper there. The article takes Blinders thesis, and tells us about the positive aspects of it, and the negative. Economic theorists accordingly divide the world’s goods and services into two bins, tradable and nontradable, and it moves only in one direction, that is, more and more items become tradable. People say that the third industrial revolution will require vast and unsettling adjustments, and that we have done that before with the other two revolutions. We should not fear, since according to the other two, the revolution will not mean the end of service jobs, nor cause widespread unemployment. Also not all service jobs can be offshored. The world gained a lot from the first two revolutions, and is likely to do so from the third one as well. The article also focuses on improving the safety net in the USA to support works that lose their jobs, and the “Cost disease” of the personal services. The cost disease tells us that in...
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...Offshoring Impact on U.S. Software Engineers for Leadership and Organizational Behavior Thesis: In my workplace, we have been outsourcing some technical work to Mexico. It has been interesting the feedback we are getting from our programmers. Although we’re outsourcing only when the work exceeds our capacity, they’re rightly concern about their jobs; they are concern about offshoring. I would like to write a feasibility analysis of offshoring work for my class project. I would like to be specific to “offshoring impact to software engineers”. April 17, 2011 Contents Offshoring Impact on U.S. Software Engineers 1 Contents 2 1 Introduction 3 1.1 Definitions 3 1.2 Summary 3 2 Data Section 4 2.1 Offshoring from a political perspective 4 2.2 Offshoring from a business perspective 7 2.3 Offshoring from software engineers perspective 9 3 Conclusion 11 3.1 Summary of Findings 11 3.2 Recommendations 11 4 Appendices 13 4.1 2008 Projected Base Salary Increases 13 5 Bibliography 14 1 Introduction 1.1 Definitions According to United States Department of Labor, software engineers (job 15-1031) develop, create, and modify general computer applications software or specialized utility programs. Analyze user needs and develop software solutions. Design software or customize software for client use with the aim of optimizing operational efficiency. May analyze and design databases within an application area, working individually or coordinating database...
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...Off shoring ethics Proponents of offshoring point towards globalisation as a reason to support it. Part of doing business in an interconnected world means that, yes, we’ll lose some jobs overseas, but we’ll also gain others. Or, at the very least, the exporting of low-skilled jobs leaves Australians with more fulfilling high-skilled ones. Offshoring’s advocates also suggest it provides economic benefits and positive PR in the beneficiary country, making that population more likely to buy Australian goods. It similarly increases Australians’ purchasing power because products are cheaper when they’re manufactured overseas. Then there’s the profit motive. If offshoring enables Aussie firms to make more money, that creates a stronger Australian economy, greater shareholder returns, and healthier superannuation balances. There was a study released this year by Harvard, for example, which showed that a 10 per cent increase in foreign investment leads to a 2.6 per cent increase in investment back home. And we haven’t even touched on the skills shortage yet. If companies can’t source the right workers in Australia, it makes sense to look elsewhere. To not do so would restrict economic growth. That, in a nutshell, is the argument in favour of offshoring. In short, the most efficient allocation of resources is paramount. Even though it’s sad to see people lose their jobs, there’s a net advantage overall from a macroeconomic viewpoint. But now for the downside. Professor Greg Bamber...
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...Offshoring: The Future of American Workers Ericka Bolling Shorter University Abstract Outsourcing is the catchphrase shaking up the worldwide financial environment. Offshoring or outsourcing has changed the way many businesses and individual coexist today. Each person today, respects many aspects of offshoring/outsourcing and we have learned that more organizations are using different assets from offshoring to pick up a business advantage. With the changing worldwide economy, and the inordinate expenses connected with keeping an employees at a staffed capacity, a large number of today's organizations and partnerships are outsourcing the generation of merchandise and administrations to outside firms with an end goal to cut expenses. While numerous experts contend that this can decimate nearby economies by cutting employments at home. There are numerous disservices to offshoring which affects our American workers and families and the practice of offshoring has taken a turn in the direction of an unethical practice. For laborers in the US, various occupations are lost permently, numerous workers need to increase new abilities, due to dimished wages because of the intensity of abroad laborers. Fundamentally, American laborers are presently compelled to contend on a worldwide level, as are organizations in this global commerce. Offshoring: The Future of American Workers Offshoring and outsourcing are words that many use interchangeably. Nevertheless, there are keen...
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...Is Production and Service Offshoring by United States Multinationals Bad for the United States Economy? Offshoring or offshore labor outsourcing is when a company relocates all or part of its production or services such as accounting or human resources to another country. There is no doubt that this has an effect on the U.S. economy. This paper will discuss the reasons that U.S. multinationals choose to offshore as well as the positive and negative effects this has on our economy. The downside of offshoring is the unemployment that occurs domestically when a U.S. company sends some or all of its production abroad. The disruption caused by this unemployment may lead to lower consumer spending by the laid-off workers which can in turn cause a reduction in economic growth overall. Additionally, unemployment caused by offshoring may necessitate a major effort to retrain the affected workers for new jobs which may be quite costly. Another problem with offshoring is the risk that products manufactured abroad pose because they are made without proper oversight. This can lead to dangerous and unhealthy imported goods such as toys tainted with lead and pet food laced with toxic substances. The positive side of offshoring is the money that a company saves on labor costs. They also avoid costly regulatory or environmental laws, and experience lower tax rates. Additionally, offshoring can be beneficial when certain company responsibilities can be done more efficiently overseas because...
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...The Effect of Offshoring on Business Charles Taylor ISTM 5002 Communication Skills for Today’s Information Technology Leader 2819 Admirals Walk Drive East Orange Park, FL. 32073 Telephone: 904-269-1336 Email:ctaylor108@capellauniversity.edu Instructor: Susan Duff Introduction Offshoring also known as offshoring outsourcing is a term which came to use more than a decade ago to describe a practice among companies located in the United States of contracting with companies outside of the US borders to perform services which could have been provided by in-house employees. In today’s globalized world outsourcings are used by companies as a means to lower labor cost and increase profits. This practice is not something new, before the internet and before business decided to globalize outsourcing for them was contacting a local temporary employment agency. Now in the 21st century a great majority of US companies has outsourced their call centers to India and other third world countries in an effort to reduce operation cost. The question is has offshoring improved customer service or hampered customer service. The biggest disadvantage with offshoring is loss of knowledge, cultural issues, potential security issues, language barrier, finding qualified personnel, local infrastructure, control and flexibility offered by local law and greater effort for knowledge transfer and process setup. Analysis India call centers help US companies cut overhead costs by decreasing...
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...Jane Harding, considered a proposal to shift 3,000 well compensated computer programming jobs from the US to existing company locations in China, India, and Brazil. Harding, senior VP for Human Resources in the Global Services Division (GSD) of Global Information Systems, Inc. (GIS). GIS had 2003 revenues of nearly $90 billion. GSD accounted for about half of GIS’s total revenues and an equal fraction of its total profits. It also included more than half of the company’s 315,000 worldwide employees. A significant portion of GSD’s business came from customers outsourcing their business-process needs. GSD signed multiyear contracts with customers. Most of these long-term contracts were won through highly contested competitive proposals. Competition was against Accenture, Ltd., Electronic Data Systems Corp., Computer Sciences Corp., and Perot Systems. These multiyear billings of some contracts totaled in excess of $1 Billion. Pretax profit margins at the division level were close to 10%. GSD presented the most attractive value proposition to potential customers by cutting costs and improving performances by “offshoring certain activities. The combination of huge capacity expansion and similarly large price reductions in telecommunications made it highly efficient to establish customer service/call centers, software developments centers, engineering design centers, and back-office accounting centers in low-cost areas of the world that had been or were now developing...
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...version of the paper prepared for IMRC 2006 conference on Global Competitiveness through Outsourcing: Implications for Services & Manufacturing, Indian Institute of Management (IIM), Bangalore, July 13-15, 2006. Abstract This paper analyses the implications of differing global demographic trends for India’s competitiveness in outsourcing and offshoring. It also briefly notes the implications of differing demographic trends among the Indian states. The paper argues that demographic complementarities with high-income countries provide India with one-time opportunity to sustain its growth rate and occupy all segments of global outsourcing and offshoring activities. India has used the labor cost advantage to gain reasonable market share in these activities. It however faces serious internal and external challenges in sustaining its international competitiveness, particularly with respect to labor cost. With sustained focus on human resource development, diversification and upgradation policies India can continue to atleast maintain its global market share, and help nurture globally competitive companies. Keywords: Outsourcing, Offshoring, Globalization. India, Demographic Trends, -1- I. Introduction Outsourcing has been among the most extensively debated public policy...
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...Offshoring, also known as offshore outsourcing, is the term that is used to describe the practice among companies located in the United States on contracting businesses beyond U.S borders to perform services that would otherwise have been provided by in-house employees in white-collar occupations. The term can be applied to U.S. firms that are offshoring the jobs of blue-collar workers on textile and auto assembly lines, for example, which has been taking place for decades. The extension of offshoring from U.S. manufacturers to facilitate providers has heightened public policy concerns about the extent of job loss and foregone employment opportunities among American workers. This concern was especially relevant to policymakers because of the national unemployment rate persistently exceeding 9% despite the end of the Great Recession in June 2009 . The outsourcing of service sector jobs from the United States was a response to the early 1980s recessions when employers narrowed their focus to the company’s core mission and contracted peripheral activities (e.g., janitorial duties) to other U.S. businesses. The 2001 recession caused employers to seek further efficiencies by tapping into the global supply of labor. U.S. businesses were able to outsource overseas the jobs of white-collar workers in some service providing industries as a result of widely disseminated technological advances that permit low cost, good quality, and high speed transmission of voice and data communications...
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...trend of reshoring and it effect on America. Reshoring is the action of a company to bring jobs back to the United States (US) that were once being done overseas. The trend has been happening a little bit over the years but has gained some steam over the past few years. Some of the reasons for this shift is that the low cost labor advantages that some countries had in the past is eroding due to inflation and other factors. Another factor is costs associated with the logistics of getting parts from overseas location to your market in the US. There are other factors to consider when it comes to reshoring such as innovation, diminished customization, and concerns of quality. All of these factors are reasons that reshoring is occuring and gaining steam. Reshoring Reshoring is when jobs that were once being performed overseas is being brought back to the US. This trend has been happening over last few years but in the last couple of years this trend has gained some steam because the cost saving that were once so prevelant overseas is no longer being realized now. The cheap labor force that existed isn’t as cheap as it once was. The areas of the world that supplied the cheap labor have risen the wages of their workers and the skill set that is required is no longer available. Another factor that there is to consider is the logistics of moving parts from overseas to its’ marketplace in the US. Then there is the other factors to consider when a company is thinking about reshoring and...
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...Outsourcing vs. Offshoring Once e have seen the reason and downsizes about outsourcing, let’s talk about the implications it implies. Taking what Claudia has introduced, offshoring is a possible way out of outsourcing and the most controversial one. To clear your mind; the biggest difference is that while outsourcing can be (and often is) offshored, offshoring may not always involved outsourcing. Both may save company money, but only offshoring specifically means sending jobs out of the country, typically to a cheaper location. It includes both to the setup of a subsidiary abroad, or to the outsource activities of a company. So the question is, not just when to outsource, but when to do it through offshoring? 1. It depends on the quality you want to ensure to the client? Ultimately, the best solution for your business depends on your needs. If you need a high level of quality and communications, outsourcing locally may be best. If you need low costs and a systematized business, offshoring is often a better solution. 2. Or maybe it depends on the relationship you must have with the client? Activities which can be precisely specified can be offshored effectively. This is why software coding is often done in an offshore location. On the contrary, activities that require direct customer interaction, deep domain knowledge, or deep cultural knowledge should be onshored. Thus, customer service is usually conducted onshore because of the need to be close to customers...
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