What considerations might move companies to outsource or offshore parts of their business and what might make them refrain from doing so?
A company that wants to outsource or offshore parts of their business, has to make aware of the consequences.
There are some advantages and disadvantage to look at by outsourcing to India for instance.
First advantage, are the lower labor costs in overseas.
The economist showed in an article about outsourcing, that the overheads in India are only one third in comparison to the US overheads.
Second advantage, are the conditions concerning education and schooling.
That article showed also, that college graduates checking credit card bills or reports for insurance companies rather than uneducated people.
Third advantage is the technical infrastructure.
More and more lager cities like Bangalore are linked to the internet.
This fact makes communication between continents easy.
On the other side of job migration are the following disadvantages we also need to consider.
First, companies hire good educated employees in overseas and in the consequence jobs back home get vacant.
Secondly, mass layoffs can harm a company’s image in public and for what a company stands for.
Thirdly, for outsourcing or off-shoring a company needs to provide know-how, so that service provider can accomplish tasks for them.
By doing so, more and more knowledge moves abroad and in the same time due to dismissals knowledge and practical approaches getting lost.
If I were an executive of a company that has the possibility to transfer business parts abroad, I would have my focus on avoiding the loss of know-how to foreigners.
Knowledge brings you the money whereas the saving from migration jobs does not.
December 2013
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