E-Commerce EDI Industry Perspectives
Growth in EDI OutsourcingWindows vs. Open Source
Outsourcing vs. Offshoring
Outsourcing isn't Offshoring
OUTSOURCING vs. OFFSHORING: What's the difference?
What is outsourcing? Is it offshoring? If you read any of outsourcing articles from the January 30th edition of BusinessWeek, specifically the one entitled "The Future of Outsourcing" you might not be too sure.Outsourcing and offshoring are not the same thing, but BusinessWeek never adequately illustrates that difference. Worse, throughout the article the two terms are used interchangeably as if they were identical. They're not.
Just to bring you up to speed, outsourcing is when one company hires another to complete a task the first company doesn't want to complete in-house. This happens for a variety of reasons, including cost savings, higher productivity, increased customer support and enhancing expertise. Offshoring is simply outsourcing outside of the country. I understand that national boundaries are relatively new to human existence, but I would have hoped Business Week might have grasped the concept.
During the last elections John Kerry told us that outsourcing was baaaaaaad, that it was all part of an evil agenda aimed at illegitimately lining the pockets of rich Republicans at the expense of American jobs and profits. This is something which should enflame the anger of every blue collar American....unless of course it isn't true, and it very clearly isn't.
Ironically enough, the evidence that outsourcing is in fact beneficial to our American way of life was gathered by former Clinton chairman of the Council of Economic Advisers Martin Baily. Mr. Baily found that for every dollar that is offshored, a net value of $1.12 to $1.14 is created for the American economy. This value can clearly be attributed to the benefits of outsourcing touched on earlier. Additionally, this study was primarily focused on offshoring, so the net benefits of outsourcing to the American economy are logically even more significant.
There are already reports that offshoring to India and other countries is becoming increasingly more expensive as workers in those regions demand a fair wage. As time goes by and wages and benefits in those regions come into equilibrium with American wages and benefits, the cost benefits for offshoring will be even further reduced. At that point in time many experts predict that American companies will rightly conclude that there are far more benefits to outsourcing than there are for offshoring. At this point in time the shrewdest decision makers are skipping the need for two conversions by keeping their outsourcing dollar where it already can reap maximum benefit, here in the United States.
It isn't all about the savings however. In September of 2003, information Week reported about the increased control reported by more than 800 executives that had led their company through an outsourcing conversion. According to those executives, "cost savings are still a key outsourcing benefit, but the additional business controls generated by outsourcing are driving the trend to external providers." Furthermore, 25% of the executives surveyed reported a first day improvement in business processes. These improvements are reported to be: better ability to plan, higher levels of operational reliability, and more rapid implementation of new strategies and initiatives. Contrary to what some might think, outsourcing actually gives you more control.
For most companies, especially those companies outside of the technology sector, outsourcing just makes sense. Why deviate from your core business processes when you can save on overhead, increase profit margin and most importantly, become a better functioning organization? If you went into business to make widgets, why compromise your expertise in the widget business by dedicating your resources to something which has nothing at all to do with the widget making process?
(OUTSOURCING vs. OFFSHORING: What's the difference?)
© 1999-2006 EC/EDI Ltd. All Rights Reserved.
0 Comments:
Post a Comment
<< Home