Economics
Offshoring
Offshoring refers to the practice of a company relocating some of its business processes or services to another country, often to take advantage of lower labor costs or other economic benefits. This can involve outsourcing tasks such as manufacturing, customer service, or software development to a foreign location. Offshoring has implications for global trade, employment, and economic competitiveness.
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10 Key excerpts on "Offshoring"
No longer available |Learn more- (Author)
- 2014(Publication Date)
- Orange Apple(Publisher)
Frequently used terms Offshoring is defined as the movement of a business process done at a company in one country to the same or another company in another, different country. Almost always work is moved due to a lower cost of operations in the new location. Offshoring is sometimes contrasted with outsourcing or offshore outsourcing. Outsourcing is the movement of internal business processes to an external company. Companies subcontr-acting in the same country would be outsourcing, but not Offshoring. A company moving an internal business unit from one country to another would be Offshoring or physical ____________________ WORLD TECHNOLOGIES ____________________ restructuring, but not outsourcing. A company subcontracting a business unit to a different company in another country would be both outsourcing and Offshoring. Related terms include nearshoring, which implies relocation of business processes to (typically) lower cost foreign locations, but in close geographical proximity (e.g., shifting United States-based business processes to Canada/Latin America); inshoring, which means picking services within a country; and bestshoring, or rightshoring, picking the best shore based on various criteria. Business process outsourcing (BPO) refers to outsourcing arrangements when entire business functions (such as Finance & Accounting, Customer Service, etc.) are outsourced. More specific terms can be found in the field of software development - for example Global Information System as a class of systems being developed for / by globally distributed teams. A further term sometimes associated with Offshoring is bodyshopping which is the practice of using offshored resources and personnel to do small disaggregated tasks within a business environment, without any broader intention to offshore an entire business function.
eBook - ePubOffshoring of white-collar services
Business and economic perspective
- Artur Klimek(Author)
- 2020(Publication Date)
- De Gruyter(Publisher)
1 Past developments and recent trends in Offshoring of white-collar services1.1 Offshoring and offshorability
Offshoring adds the international context to sourcing decisions of firms. International sourcing is defined as “the total or partial movement of business functions (core or support business functions) currently performed in-house or currently domestically sourced by the resident enterprise to either non-affiliated (external suppliers) or affiliated enterprises located abroad” (Eurostat, 2019 ).There is no commonly accepted definition of Offshoring, what makes systematic statistical analyses very difficult. The issue is even more evident for service Offshoring, where the support of private research institutions enriches understanding of the industry and its economic impact (United States Government Accountability Office, 2004 ). A very simple definition of Offshoring of services describes it as “the transnational relocation or dispersion of service related activities that had previously been performed in the home country” (Doh, Bunyaratavej, & Hahn, 2009 , p. 926). Jensen, Larsen, and Pedersen (2013 , p. 315) also use a similar approach to define Offshoring as “the relocation of organizational tasks and services to foreign locations”.Statements that Offshoring means moving activities from high-cost countries to low-cost ones, or from highly developed to less developed countries are no longer justified. Nevertheless, the common characteristics of the Offshoring destinations has been a certain level of underdevelopment. It was the case for the Caribbean or Ireland, especially in the beginning of the interest in Offshoring. The basic motive of the cost arbitrage was supported by the financial incentives and loose legal framework in host countries. The evidence from US Offshoring firms confirms that the propensity of firms to source from a foreign supplier falls with the rising rigidity in the host country labour market (Kohler & Kukharskyy, 2019
eBook - PDF- Elhanan Helpman(Author)
- 2011(Publication Date)
- Belknap Press(Publisher)
6 Offshoring and Outsourcing Despite their richness, the analytical frameworks discussed in the previous chapters miss elements of the international organization of production that have grown in prominence in recent decades. In particular, fragmen-tation of the production process across firms and countries is more preva-lent now than ever before, and this has affected the sourcing strategies of corporations at home and abroad. The proximate cause of these changes has been developments in information technology (IT), which greatly improved communications, computer-aided design, and computer-aided manufacturing. These improvements enable producers to split the pro-duction process into stages that can be physically and geographically separated from each other and located in different regions of the same country or in different countries. To accommodate these new technological possibilities in a cost-effective way, business firms have changed their organizational forms and management practices. 126 In particular, the outsourcing of various stages of production, to both domestic and foreign suppliers, has increased sub-stantially, and these practices have spread across many industries in the Offshoring and Outsourcing 127 United States. 127 To avoid confusion, I use the term “outsourcing” to refer to the acquisition of goods or services from an unaffiliated party (i.e., from a company that neither owns nor is owned by the buyer of the goods or services), and independently of whether the unaffiliated supplier is located at home or abroad. And I use the term “Offshoring” to refer to the sourcing of a good or service in a foreign country, either from an affil-iated or an unaffiliated supplier. According to the latter definition, the Offshoring of various stages of production, and especially the production of intermediate inputs, has increased rapidly, greatly expanding world trade.
eBook - ePubThe Digital Economy
Business Organization, Production Processes and Regional Developments
- Edward J. Malecki, Bruno Moriset(Authors)
- 2007(Publication Date)
- Routledge(Publisher)
et al. (2006: 76) underline that public concern in the US was triggered by a Forrester Research (2002) report “indicating that 3.3 million service jobs would be lost to Offshoring by 2015.”According to Farrell et al. (2005a), 2003 worldwide exports of service amounted to $1,697 billion, of which 3 percent ($51 billion) originated from low-cost locations. With a 2008 world market projected at $2,370 billion, a 30 percent compound annual growth rate (CAGR) from 2003 to 2008 would establish the world Offshoring market of services at $237 billion, 10 percent of projected world service exports. The same authors surveyed eight major business sectors, totalling 244 million jobs (15 percent of the world’s nonagricultural employment): package software, IT services, banking, insurance, pharmacy, automobile, health care, retail. They estimate that in 2003, 565,000 jobs in these sectors were performed in low-wage countries to serve demand from developed countries, 0.6 percent of developed country employment in the eight aforementioned industries; the highest share of offshored jobs, 7 percent, is found in IT services and packaged software. The number of would-be offshored jobs in these sectors is projected to be 1.2 million in 2008, or 1.3 percent of the total.Box 6.1A shared service center: Procter & Gamble’s Global Business Services for the Americas in San José, Costa RicaGlobal Business Services is Procter & Gamble’s (P&G’s) worldwide shared services organization. It provides back-office support to nearly 98,000 employees in over 80 countries and comprises three centres: Manila (Philippines), Newcastle (United Kingdom) and San José (Costa Rica). In the process of selecting these three cities as locations for its Global Business Services centres, the company reviewed more than 120 cities worldwide. The key reasons for choosing Costa Rica were the pool of highly educated and skilled labour, the country’s long-standing democratic tradition, an attractive cost structure and an investment-friendly approach to foreign investors.
eBook - ePub- James P. Neelankavil, Anoop Rai(Authors)
- 2014(Publication Date)
- Routledge(Publisher)
3Before we discuss different aspects of the new form of outsourcing, we define new terms that have crept into the English lexicon over the past few decades: Offshoring, inshoring , and near-shoring . We begin with the generic term outsourcing .OUTSOURCING , OFFSHORING , INSHORING , AND NEAR -SHORING
OUTSOURCING
The term “outsourcing” denotes the contracting by a company of selected work, previously performed in-house, to a third-party vendor. The location of the third-party vendor is immaterial; it may be domestic or overseas. The work may be relatively minor and peripheral to the company’s main activity, for example, janitorial services, facility maintenance, landscaping, or worker training. Alternatively, it can involve work that is more integral to the core business of the company, such as manufacturing, accounting, payroll, or marketing.A company may choose to manufacture and assemble all the components of its product in-house, or it may choose to manufacture only selected components that are considered noncore elements. Another option, or business model, for a company is to outsource the manufacturing of all the components and perform only the assembly work in-house. A third possible model is to outsource the design, marketing, and accounts receivables (collection of payments) services while performing the manufacturing and operations in-house. Outsourcing can include a combination of core and noncore activities, and the actual model chosen will depend on the strategic mission of the company and potential cost savings.
eBook - PDFThe Power of Standards
Hybrid Authority and the Globalisation of Services
- Jean-Christophe Graz(Author)
- 2019(Publication Date)
- Cambridge University Press(Publisher)
In the meantime, the economy has been struck by a global crisis whose extent was only rivalled in the 1930s. Job losses for the less skilled and, increasingly, the middle classes in rich countries have remained a core issue. While part of the onus falls on manufacturing, services are seen as bearing the brunt of the expense. Big firms led the way, using the Internet to offshore information technology, back-office work, and even much more complex tasks to places such as India, Morocco, the Philippines, and Fiji. Smaller firms soon followed suit. The scope of service activities identified as ‘tradable’ across borders has widened as well. The Economist (2013), widely known for its liberal views (in the UK sense), recognises that ‘Offshoring has brought huge eco- nomic benefits, but at a heavy political price’. At the same time, services are still seen as remaining inherently difficult to internationalise. Com- panies have begun to reconsider what many saw as common sense. In contrast to Offshoring – a relocation of activities abroad, mainly for cost purposes – the new game in town, in particular in the United States, is reshoring – a relocation of activities at home, not only for quality pur- poses but also with increasingly competitive costs. Against this back- ground, let us take a closer look at what is at stake, first by examining existing data on the internationalisation of services. Services now account for approximately 75 per cent of GDP and employment in the advanced economies of the OECD, and more than 50 per cent in developing countries and emerging economies. Neverthe- less, we are still far from a globally integrated supply of services. Sectorial coverage remains narrow and apparently no upsurge of total trade in services has taken place in the last two decades. As Tables 3.1 and 3.2 show, services continue to represent less than 25 per cent of world trade.
eBook - PDFSourcing in India
Strategies and Experiences in the Land of Service Offshoring
- Guido Nassimbeni, Marco Sartor(Authors)
- 2008(Publication Date)
- Palgrave Macmillan(Publisher)
As synonyms of domestic we can find these terms: • local (Arora et al., 2001; WTO, 2005b; Ono, 2003; Huws et al., 2004); • onshore (Deloitte, 2004b; WTO, 2005b; Sourcing Interest Group, 2003). Some studies mention still another term: Nearshoring (Gupta et al., 2003; Ganesh, 2004; Baldwin, 2003; Bajpai et al., 2004). It refers to Offshoring activites in countries close to that of origin. For example, some American companies recurring to services provided in Canada, as well as the de-location (transfer) of processes from European industrialized countries towards other European recently developed countries (such as Romania and the Czech Republic) are sometimes defined as Nearshoring (Bajpai et al., 2004; Huws et al., 2004; Gupta and Nidhin, 2003). Going back to Fig. 1.1, we can recognize two macro areas of Service Offshoring (quadrants 2 and 4) and of Service Outsourcing (quadrants 3 and 4) that correspond to streams of studies that sometimes intersect. Some contribute focus on service outsourcing (Fixler and Siegel, 1999; Go ¨rg and Hanley, 2003; Monczka et al., 2005; Kirkwood, 2005) but do not ignore its possible offshore solutions, i.e. they deal with the interna- tional articulations of the sourcing processes. And some works (Kumar and David, 2003; Irving et al., 2003; Gupta et al., 2003, Gupta and Nachum, 2003) focus on service Offshoring while considering outsourc- ing as one of its possible declinations. A further literature classification deals with the typology of out- sourced services. The prevalent distinction is between Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO). It is quite easy to distinguish the literature associated with these two forms, while it is more difficult to rigorously circumscribe the two corresponding types of sourcing. According to Willcocks et al. (1995), on the same line as Hignet et al.
- Marshall B. Reinsdorf, Matthew J. Slaughter, Marshall B. Reinsdorf, Matthew J. Slaughter(Authors)
- 2009(Publication Date)
- University of Chicago Press(Publisher)
Blinder, A. S. 2006. O ff shoring: The next industrial revolution? Foreign A ff airs 85 (2): 113–28. Ekholm, K., and K. Hakkala. 2005. E ff ect of o ff shoring on labor demand: Evi-dence from Sweden. IUI Working Paper no. 654. Feenstra, R. C., and G. H. Hanson. 1996. Globalization, outsourcing, and wage inequality. American Economic Review vol. LXXXVI: 240–45. 242 Mary Amiti and Shang-Jin Wei Feenstra, R. C., and G. H. Hanson. 1999. The impact of outsourcing and high technology capital on wages: Estimates for the United States, 1979–1990. Quar-terly Journal of Economics 114 (3): 907–40. Hamermesh, D. 1993. Labor Demand. Princeton, NJ: Princeton University Press. Hanson, G. H., R. J. Mataloni Jr., and M. J. Slaughter. 2003. Expansion abroad and the domestic operations of U.S. multinational firms. University of Califor-nia, San Diego; BEA; Tuck School of Business at Dartmouth; NBER. Unpub-lished Manuscript. Harrison, A. E., and M. S. McMillan. 2005. U.S. multinational activity abroad and U.S. jobs: Substitutes or complements? University of California, Berkeley. Un-published Manuscript. Jensen, J. B., and L. Kletzer. 2005. Tradable services: Understanding the scope and impact of services o ff shoring. In Brookings trade forum 2005, o ff shoring white-collar work: The issues and the implications, ed. L. Brainard and S. M. Collins, Washington, D.C.: Brookings Institution. Krugman, P. 1995. Growing world trade: Causes and consequences. Brookings Pa-pers on Economic Activity, Issue no. 1:327–377. Washington, D.C.: Brookings In-stitution. ———. 2008. Trade and wages, reconsidered. Brookings Papers on Economic Ac-tivity, forthcoming. Lorentowicz, A., D. Marin, and A. Raubold. 2005. Is human capital losing from outsourcing? Evidence for Austria and Poland. CEPR Discussion Paper no. 5344. Mann, C. L. 2004. Globalization of IT services and white collar jobs: The next wave of productivity growth.
eBook - PDF- Angus Cameron, Ronen Palan(Authors)
- 2003(Publication Date)
- SAGE Publications Ltd(Publisher)
Furthermore, because of the ‘ off -shore’ character of these developments, they appear to be both outside the state and, therefore, to herald the advent of a borderless world (Ohmae 1990). These easy assumptions are, as we will see, largely mistaken. 90 THE IMAGINED ECONOMIES OF GLOBALIZATION This chapter examines the role played by both the theory and practice of offshore in the development of the contemporary fa -s in two main ways. First, we examine briefly the institutional and legal form of the ‘real’ offshore economy itself, partly to establish clearly what we mean by it, and partly to excavate some of the other stories about it. 3 Specifically, we want to expose the close connections, both historically and contemporaneously, between specific nation-states and offshore institutions. Second, we examine critically the spatial narratives contained within the idea of offshore to assess the role it plays in the normative spatial and temporal configuration of globalization. The institutional dimensions of offshore What, then, is ‘offshore’? And how could it be confused for globalization? Although the offshore economy is now a well established and extremely significant element in the contemporary world economy, and although its origins can be traced back for a very long time, the precise definition of ‘offshore’ is elusive. The better-known aspects of the offshore economy are the offshore financial markets, or the Euromarkets, and tax havens. But as one of us has argued in previous publications, in practice offshore is a much broader category that consists of all sorts of ‘sovereign’ spaces essentially defined by their relative lack of regulation and taxation compared to nation-states (Palan 1998a, 2003). Of these, we emphasize four main elements that, whilst distinct in their institutional form, mode of operation and their relationship to conventional economic spaces, nevertheless share certain important characteristics.
eBook - PDF- L. Willcocks, M. Lacity(Authors)
- 2006(Publication Date)
- Palgrave Macmillan(Publisher)
4 Financial Services 1, for example, uses offshore resources primarily to enable strate- gic agility. For the past 15 years, it has developed captive centers in Manila and Mumbai, and various joint ventures and fee-for-service relationships with 14 Indian suppliers. During the refinancing boom, the company was able to beat competitors by quickly meeting the immense surge in demand for IT and business process services. As the refinancing boom burst, the company was able to immediately scale back resources. Financing new product development, which is enabled by offshore, is a key strategy for small companies trying to compete with the deep pockets of larger players. A small US-based healthcare services organization wanted to develop a software product to provide information for quick response to biological terrorism. Because the organization is short on funds, it used an offshore supplier to finance the development of the new system. Under this agreement, the supplier owns the intellectual property rights but the customer organization will market the application. Both parties will share software-licensing revenues when the product goes to market. Lesson 2. Select an offshore sourcing destination based on business objectives Most of the literature suggests that senior executives select offshore desti- nations by focusing solely on relative country advantage in terms of costs and risks. Consulting firms are a major source of information for senior executives, providing comparative analyses of offshore destinations based Joseph Rottman and Mary Lacity on relative advantage of government support, labor pool characteristics, cultural compatibility, etc.
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