Offshoring Essay Example | Topics and Well Written Essays - 1250 words - 1

Offshoring - Essay Example Offshoring, not only helps reduce the cost of operations of a company, but may also benefit in terms of promotion in overseas markets. For some companies, offshoring of selective company processes may be the solution to their problems; for others total shifting may provide the desired outcome. Whatever the purpose may be, considerable data has accumulated to support the fact that offshoring for some companies has a survival value. Discussion Although offshoring has a number of advantages, there are number of issues that arise due to its very nature. A prominent cause of disruption in business processes can be related to the distance that exists between the control center and operation center. The distance may be in terms of physical or geographical locations or in terms of cultural or social factors. The term used for a team working in geographically dispersed settings is GDT (globally distributed team). It is defined as a team of workers; (Contractor, 2011) Related to the same organ ization Serving a universal purpose and working in an inter-dependent manner Using communication based on technological means Located in different geographical locations around the globe Benefits Generally, the perception is that offshoring countries lose finances to the countries to which services are offshored; this is however contrary to the reality and experts are of the opinion that it is not only the offshoring country that benefits from the process but also the offshored country that gains benefit (Farrell, 2006). It therefore appears mutually rewarding for all the countries that are part of the process. It is perhaps a means of promoting the concept of globalization where every country plays its role for the collective benefit of all. The first and foremost benefit of offshoring is related to financial savings. This is clearly manifested by the fact that the vast majority of offshoring is directed towards third world countries, where labor is considerably cheaper than the so urce country. In addition to the financial savings, the company also benefits from entering the new potential markets of the offshored countries. Since production is often carried out in such countries, the products are easily introduced into the local market which may provide an additional source of income for the company. Using locally produced raw material of low cost, the company is often in a position to not only earn profits from local markets, but also use their own market to earn huge profits. A number of benefits for the destination countries are related to direct investment which is received in return for services offered. These benefits may be in the form of country's growth, technology transfer, job creation and in some cases the firms offering services also benefit from the process of offshoring (OECD, 2007). Although the level of benefit obtained in this regard may vary from case to case; yet the projected benefits give an idea about the possibilities of improvement re lated to offshoring. Dilemma of offshoring Offshoring has affected the lives of a number of people living in the developed countries. To maintain their standard of life they require higher compensation rates as compared to their equally qualified counterparts residing in third world countries. A number of companies of the developed countries are able to get the same services from experts residing in under-developed