Business Performance Improvement Technologies - an Introduction



Although the language is often used interchangeably, outsourcing and offshoring are technically not the same thing.

Outsourcing can of course be to local companies or foreign companies, and in the latter case it should really be called "foreign outsourcing," but the context is the same - you are contracting some of the work previously done in-house, to another company, for payment.

Offshoring, on the other hand, refers to actually setting up your own business - perhaps a division of your existing business - on foreign soil.

Offshoring and Offshoring 2.0: What's the Difference?

By Olga Makhnach

Before clarifying the difference between offshoring and offshoring 2.0, let me, first, introduce the notion of outsourcing. It was exactly this business process, which laid the foundation to offshoring. The idea of outsourcing was born when some big companies decided to get rid of some routine work which, they thought, could be performed by some third parties for money. That is how they started outsourcing everything but core business activities to other companies, yet within national boundaries.

Some time later huge imbalance in global economy prompted them another solution. Why not reduce costs by sending all outsourced work abroad? By that time, people from developing countries had already started opening up offshoring companies, offering their offshoring services to their post-industrial partners. The process was two-way profitable. On the one hand, the cost of labor in developing countries is cheaper than in post-industrial countries. It was a benefit for the companies, which shifted their work abroad, because they could down their costs. On the other hand, these foreign companies paid more to offshoring companies than a national company would pay.

That is how the idea of offshoring was born. First, low-skilled service jobs like telephone call centers, component assembly were handled over to offshoring companies. Later on, offshoring companies started taking up more complicated tasks, and proved that they could perform them on the same level as their colleagues from post-industrial countries, or even better.

With the arrival of the digital age Offshoring 2.0 appeared. Because digital communications have become more accessible and affordable, many partner offshoring companies, have become able to do even more for their clients than before.

If later, outsourcing offshoring companies were involved in all kinds of outsourcing, now they have become more specialized. Here lies the main difference between Offshoring and Offshoring 2.0. Today there is a row of offshoring companies, which deal with one particular type of tasks, i.e. software development, web development engineering, financial analysis etc. Some say that such professional classes as lawyers, accountants, computer programmers will soon disappear in post-industrial countries, because all their work will be outsourced to outside countries!

Thanks to their narrow specialization, say, web development, offshoring companies get a nice opportunity to master correspondent skills and, thus, do their job on a highly professional level. Rather than handling everything without having deep knowledge and enough experience, having narrow specialization proves to be more advantageous to the company itself and its clients.

Offshoring 2.0 is only starting to open up great opportunities, but already, now, it promises to become the greatest business process of the XXI century.

Olga, copywriter for MoveYourWeb Offshore services company

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