Adam Smith the economist once said in his treatise The Wealth of Nations, “If a foreign country can supply us with a commodity cheaper than we ourselves can make it, it is better to buy it of them.” Outsourcing therefore is simply a progression of an idea that has existed since early days of trade.
From Outsourcing to Offshoring
In outsourcing we have simply progressed to another step that is “offshore outsourcing” in which the buyer of the service is located in some other country then the provider of the service.
Offshoring is best described as work traveling from large corporations, halfway across the world technology to savvy small IT companies. Behind every project that is offshored a multifaceted decisions process is involved selecting the right mode to suit a particular business need or scenario.
Many developing countries are attracting business from developed countries due to factors like manpower, Knowledge, infrastructure facilities, Legal and business environments, not to mention the huge amounts of costs it saves. Offshoring also enables the companies to save on staff, equipment, training and maintenance.
The Indian Connection
Offshoring has become tantamount to India as the IT personnel and infrastructure in India is far superior to its counterparts. Not only do we have the latest and most advanced knowledge base, English is our second language. There is also the fact that IT infrastructure in India is far more highly developed and widespread than any other developing country. Just for this reason IT Companies across the world outsource their IT, web design and development requirements to India.
Over the years outsourcing has become a specialty for India, many outside countries like USA, Canada, Australia have turned their IT operations of all kinds like, web development, software solutions, web designing etc. to us, so that they can concentrate more on their business’s core competency.
There are many modes of Offshoring:
Joint Venture Offshoring
In this type of contract an organization ties up with local company either by taking an equity stake or forming an independent company in which each company contributes resources.
Subsidiary/Captive Development Center Offshoring
In these organizations simply become subsidiaries of the International companies. They are known as offshore development center (ODC), captive development center or in some cases simply branch or local office.
Service Provider Offshoring
This is the most popular and advantageous method of all Offshoring, to minimize risk and get the best of both worlds, companies outsource projects, programs and individual work orders to offshore vendors.
Service Provider Offshoring
The JV and subsidiary models of outsourcing may involve deep commitment on the part of a client organization, a move that management at traditional companies may sometimes be averse to. To counter the perceived risks of these models and to capitalize on the benefits of offshoring, companies resort to outsourcing projects, programs and individual work orders to offshore vendors. Depending on your business need and your contractor you can decide which option gives you the maximum benefit.
There is no doubt that Outsourcing Offshoring is here to stay, and India has become the largest player of this arena.