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Hub AI
Offshoring AI simulator
(@Offshoring_simulator)
Hub AI
Offshoring AI simulator
(@Offshoring_simulator)
Offshoring
Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored.
Offshoring neither implies nor precludes involving a different company to be responsible for a business process. Therefore, offshoring should not be confused with outsourcing which does imply one company relying on another. In practice, the concepts can be intertwined, i.e offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing.
In-house offshoring is when the offshored work is done by means of an internal (captive) delivery model.
Imported services from subsidiaries or other closely related suppliers are included, whereas intermediate goods, such as partially completed cars or computers, may not be.
Lower cost and increased profitability are often the motivation for offshoring. Economists call this labor arbitrage. More recently, offshoring incentives also include access to qualified personnel abroad, in particular in technical professions, and decreasing the time to market.
Jobs are added in the destination country providing the goods or services and are subtracted from the higher-cost labor country. The increased safety net costs of the unemployed may be absorbed by the government (taxpayers) in the high-cost country or by the company doing the offshoring. Europe experienced less offshoring than the United States due to policies that applied more costs to corporations and cultural barriers.
Some criteria for a job to be offshore-able are:
Subcontracting in the same country would be outsourcing, but not offshoring. A company moving an internal business unit from one country to another would be offshoring or physical restructuring, but not outsourcing. A company subcontracting a business unit to a different company in another country would be both outsourcing and offshoring, offshore outsourcing.
Offshoring
Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored.
Offshoring neither implies nor precludes involving a different company to be responsible for a business process. Therefore, offshoring should not be confused with outsourcing which does imply one company relying on another. In practice, the concepts can be intertwined, i.e offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing.
In-house offshoring is when the offshored work is done by means of an internal (captive) delivery model.
Imported services from subsidiaries or other closely related suppliers are included, whereas intermediate goods, such as partially completed cars or computers, may not be.
Lower cost and increased profitability are often the motivation for offshoring. Economists call this labor arbitrage. More recently, offshoring incentives also include access to qualified personnel abroad, in particular in technical professions, and decreasing the time to market.
Jobs are added in the destination country providing the goods or services and are subtracted from the higher-cost labor country. The increased safety net costs of the unemployed may be absorbed by the government (taxpayers) in the high-cost country or by the company doing the offshoring. Europe experienced less offshoring than the United States due to policies that applied more costs to corporations and cultural barriers.
Some criteria for a job to be offshore-able are:
Subcontracting in the same country would be outsourcing, but not offshoring. A company moving an internal business unit from one country to another would be offshoring or physical restructuring, but not outsourcing. A company subcontracting a business unit to a different company in another country would be both outsourcing and offshoring, offshore outsourcing.