Offshore Outsourcing

Offshore outsourcing is the practice of hiring an external organization to perform some business functions (“Outsourcing”) in a country other than the one where the products or services are actually developed or manufactured (“Offshore”). It can be contrasted with offshoring, in which a company moves itself entirely to another country, or where functions are performed in a foreign country by a foreign subsidiary. Opponents point out that the practice of sending work overseas by countries with higher wages reduces their own domestic employment and domestic investment. Many customer service jobs as well as jobs in the information technology sectors (data processing, computer programming, and technical support) in countries such as the United States and the United Kingdom – have been or are potentially affected.

Types

There are four basic types of offshore outsourcing:

• ITO or Information Technology Outsourcing is where outsourcing related to technology or internet such as computer programming.
• Business Process Outsourcing (BPO) involves contracting out of operational functions to a third party service provider.
• Software R&D — offshore software development
• Knowledge Process Outsourcing (KPO) is a type of outsourcing which involves or requires a more advanced technical skill and a higher level of expertise.

Criteria

The general criteria for a job to be offshore-able are:

• There is a significant wage difference between the original and offshore countries;
• The job can be telework;
• The work has a high information content
• The work can be transmitted over the Internet;
• The work is easy to set up
• The work is repeatable

The driving factor behind the development of offshore outsourcing has been the need to cut costs while the enabling factor has been the global electronic internet network that allows digital data to be accessed and delivered instantly, from and to almost anywhere in the world.