Ever thought about offshoring your business? This article will give you the answers to all your questions and queries about the pros and cons of offshoring.
Offshoring is quite similar to outsourcing, you choose a process or function from your business and entitle another company to complete the job for you. However, in offshoring, this process takes place overseas.
In light of recent events, offshoring has seen up-gradation from all the sectors of businesses. All the sectors are using offshoring advantages to the best of it.
- Beauty companies
- Clothing companies
- IT sectors
- Automobile industries
- Print Industries.
All these sectors offshore their operations for various reasons.
Although offshoring has many advantages there are pretty many disadvantages of the same too. Let us go through a few pros and cons of offshoring.
- 1 Pros of offshoring
- 2 Cons of Offshoring
Pros of offshoring
The company does not have to invest in the manufacturing units or for the workforce required for a certain process. This reduces the salaries as well as the materials required. Hence, there is a great margin of cost reduction and this boosts the profit levels.
Real Estate Cost Saving
When you offshore the production of certain products or services, there is no need to employ a lot of people or even buy all types of equipment.
Furthermore, this results in the infrastructure the company rents or buys. There is a huge cut down in the expenses related to real estate or infrastructure.
Offshoring gives you opportunities where you can employ and contract people for certain projects. Moreover, this helps in the reach of the company and leads to good relations with people overseas.
Flexibility and Time Zones
When dealing with different time zones, the work can be done all around the clock. Indeed this will result in the work being executed sooner than it could have been done in your own company.
Better Business Development
Undoubtedly the company has time to concentrate on developing the business rather than focusing on the manufacturing and labour intensive work. In addition to this, there will be less pressure to complete which will enhance the patience level to strategize good business development.
Offshoring operations gives you access to the availability of skilled and talented labours. Companies particularly, offshore projects where there are skilled labours can not only execute well but also deliver on time.
Many offshoring destinations have fewer business regulations, financial incentives, etc to attract foreign direct investments. Definitely, this is a plus point for offshoring.
This reduces the tax costs and the relocation of the offshoring business.
When many people work on the same project together there is more brainstorming and many ideas come up. This is what happens when you offshore your operations. There is variety and uniqueness to your work because there are experts that work in every department and when put together, the project becomes a hit.
These were a few pros of offshoring. I am sure you guys want to find out about the cons of the offshoring concept. Here you go.
Cons of Offshoring
Communication and Language Barriers
Firstly, the language barriers pose as an important threat to offshoring. The message passed cannot be understood or is usually misinterpreted because of the lack of understanding of language or accent.
Most of the times, offshoring companies not only cater to many projects at the same time but also work on it simultaneously. This results in the dilution of quality products or services being delivered.
Social and Cultural Issues
The originating companies will always have a different set of cultural and social norms as compared to that of the offshoring companies.
All the messages passed and the work being done should take care of hurting the cultural sentiments of any community. Clearly, this needs a study and understanding from both the companies.
Undoubtedly, the main reason for offshore operations is to reduce costs. If the contract contains hidden costs, the following will be the defeat of the concept of offshoring. Hence, it is very important to hire a trustworthy and reliable offshoring company.
Lack of Synchronization
Nevertheless, even if one offshoring operation fails to deliver the effect is visible on the entire project. The companies need to keep a timely check on the offshoring companies to avoid delay in delivery.
Unlike other services, offshoring does need an exchange of confidential information between the two companies. This leads to privacy threats/issues. Obviously, there are chances of companies using information against each other for various reasons.
Unemployment in Home Country
Without a doubt, offshoring leads to loss of jobs and unemployment in the home country.
Furthermore, this has a massive effect on the economy of the country. In future, this will prove problematic to the company itself.
When many offshoring agencies are involved it becomes difficult to keep track of all the work. Finally, there is a chance of losing control over the offshored departments and not getting the desired results from the project. This is one of the major problems when your offshore operations.
Each coin has two sides to it. Likewise, offshoring also has good numbers of pros and cons to it. This gives a precise idea of whether you should add offshoring to your business or not.
In the end, I hope this article has enlightened you with proper analysis of offshoring. Hope you make the best of this. All the best!