Outsourcing and Offshoring
Outsourcing and Offshoring
Mr. Cronkite
Offshoring is a kind of outsourcing. Offshoring merely means having the outsourced business functions done in another country. Frequently, work is offshored in order to reduce labor expenses. Other times, the reasons for offshoring are strategic to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically.
The term is in use in several distinct but closely related ways. It is used broadly to include substitution of a service from any foreign source for a service formerly produced internally to the firm. In other cases, only imported services from subsidiaries or other closely related suppliers are included. A further complication is that intermediate goods, such as partially completed computers, are not consistently included in the scope of the term. "Re-shoring" (sometimes "Back shoring") is offshoring that has been brought back onshore.
Offshoring can be seen in the context of either production offshoring or services offshoring. After its accession to the World Trade Organization (WTO) in 2001, the People's Republic of China emerged as a prominent destination for production offshoring. After technical progress in telecommunications improved the possibilities of trade in services, India became a country leading in this domain though many parts of the world are now emerging as offshore destinations.
The economic logic is to reduce costs. If some people can use some of their skills more cheaply than others can, those people have the comparative advantage. The idea is that countries should freely trade the items that cost the least for them to
Mr. Cronkite
Offshoring is a kind of outsourcing. Offshoring merely means having the outsourced business functions done in another country. Frequently, work is offshored in order to reduce labor expenses. Other times, the reasons for offshoring are strategic to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically.
The term is in use in several distinct but closely related ways. It is used broadly to include substitution of a service from any foreign source for a service formerly produced internally to the firm. In other cases, only imported services from subsidiaries or other closely related suppliers are included. A further complication is that intermediate goods, such as partially completed computers, are not consistently included in the scope of the term. "Re-shoring" (sometimes "Back shoring") is offshoring that has been brought back onshore.
Offshoring can be seen in the context of either production offshoring or services offshoring. After its accession to the World Trade Organization (WTO) in 2001, the People's Republic of China emerged as a prominent destination for production offshoring. After technical progress in telecommunications improved the possibilities of trade in services, India became a country leading in this domain though many parts of the world are now emerging as offshore destinations.
The economic logic is to reduce costs. If some people can use some of their skills more cheaply than others can, those people have the comparative advantage. The idea is that countries should freely trade the items that cost the least for them to