The Great Debate: Onshore vs. Offshore
Outsourcing is a term that has been used frequently over the last several years. More and more IT services are being outsourced by U.S. companies. The major dilemma that most executives face when making the decision to outsource is whether to use an onshore or offshore resource.
Onshore outsourcing refers to sending a business process to a U.S. based supplier to complete. Global sourcing is defined as exporting work to a supplier located in another country. Both types of outsourcing have significant advantages as well as drawbacks. The decision on which outsourcing model to choose is strongly dependent on the overall objectives of the outsourcing company. However, the goals for outsourcing will be the same, such as reducing operating costs, increasing productivity and re-allocating financial resources to other areas.
One of the major draws to outsourcing to onshore suppliers is the geographic proximity. The local presence gives a level of comfort to the outsourcing company and makes communication and travel easy. Offshore suppliers on the other hand are generally located in vastly different time zones, making communication difficult. Plus, the cultural differences can make it hard for the offshore resource to effectively work with the U.S. employees.
When considering outsourcing as part of IT services, executives cannot ignore the appeal of the cost savings associated with offshore resources. Companies feel the immense pressure to increase profitability and ROI. Global sourcing offers cost efficiency through a variety of means, including scalability of operations. The savings in labor also significantly reduces expenses for the outsourcing company and enables the focus to be placed on core competencies and increasing productivity.
Onshore suppliers have difficulty competing with some of the cost savings that offshore firms offer, but there are hidden costs associated with global sourcing that have to be factored in. For example, global sourcing will have ongoing costs for long distance communication, training and travel. There are also initial expenses associated with the knowledge transfer of technical and business processes. Nevertheless, even with the hidden costs, the savings are generally greater with global sourcing.
In the IT industry, the enforcement of intellectual property rights is vital and data theft can be of extreme detriment to the outsourcing company. The protection of intellectual property is often a major consideration when choosing to outsource onshore versus offshore. The United States has strict laws protecting intellectual property rights. There are major concerns about security and intellectual property in various countries, including China and many Latin American countries. Imposing intellectual property laws in these countries can be difficult.
Regardless of onshore versus offshore, the trend within the IT industry has been to outsource various processes. A&E Consulting will help you evaluate global sourcing so that you can make an informed decision. If you choose to move forward with global sourcing, we will assist you in choosing the right global sourcing partner and establishing the business relationship. In addition, we will manage the first outsourced project to make the transition as smooth as possible.
Tags: global sourcing, offshore partner, onshore outsourcing, onshore suppliers