May 15, 2015
Offshoring 101
You have no doubt heard the phrase "offshoring" bandied about, especially if you work in the information technology or manufacturing industry. It's become quite a common practice for corporations to outsource certain kinds of work to other countries. Today, we will look at offshoring and the pros and cons of relocating a process from one country to another.
What is Offshoring?
Offshoring occurs when a company outsources or hires a group of individuals in another country to complete a given set of tasks. In the 2000s, this trend grew popular among the IT crowd, as corporations discovered programmers from other regions could, in some instances, code just as efficiently as American programmers, but at a much lower cost. This practice was not just limited to application development, of course. Call centers quickly sprang up around the world to tackle issues with tech support and customer service, as well.
Information technology was not the only industry to take advantage of this process. Manufacturing companies have a long history of outsourcing work, as well, also in an effort to reduce costs. Another, lesser-known sector of the American workforce also uses offshoring. Anytime you watch a cartoon on television, odds are the majority of frames you see were created by a team of South Korean animators; only the beginning and ending frames of each set of movements is drawn here in the States.
As with all things, offshoring has its advantages and disadvantages. The main advantages relate to finances. In addition to lower salaries, companies can save on operating costs and the price of real estate. As the 2000s quickly came to a close and 2010 reared its head, however, a lot of companies began to realize that the true cost of offshoring was higher than originally thought. For example, while the upfront cost of hiring a team of offshore programmers is often cheaper, communication issues can sometimes arise, leading to delays in development schedules and recurring issues with code that needs to be fixed, often more than once.
When the above scenario occurs, costs can skyrocket, and projected launch dates can be pushed back. In worst-case examples, this leads to ballooning budgets and can cost more than it would have cost if a business had used in-house coders.
Another major con focuses on communication problems of another sort. If you have ever called tech support, you may have encountered a situation where the person on the other end of the line could not understand your problem or, worse, you could not understand their solution. What should have been a ten-minute call can quickly turn into an hour of frustration for both parties.
Quality can sometimes be a concern in the manufacturing world, as well, as production regulation can be difficult when your main company is a continent away. Lower regulatory guidance in terms of labor and materials can also affect the quality of produced goods, as offshore companies tend to face more relaxed regulations than companies here in the United States. While it may save companies in the short term, there is a possibility that offshoring could end up losing these companies money in the long run.