Adding Value through Offshoring

Question 1

offshoring

Answer 1

involves shifting jobs to another country, but it may not involve transferring jobs to another organisation.

A company may simply decide to move its local customer services operation to one of its own subsidiaries abroad. That is offshoring, but it is not outsourcing

Question 2

outsourcing (and its relation to offshoring)

Answer 2

Outsourcing need not necessarily result in job losses in a particular territory or country.

A job can simply be handed over to another organization of the same nationality and geographical location where it can be carried out more efficiently

Question 3

what are some reasons offshoring became a thing

Answer 3

• The Internet
• ICT: Voice of over IP
• Social acceptance of telepresence
• Cost cutting pressures
• Collaboration applications
• Cloud computing
• Digitization?
• Education?
• Technical supports
• Call centers
• Source of professional expertise?

Question 4

Merits of offshoring

Answer 4

• Labor cost savings
• Access to talent and qualified personnel
• Greater organizational flexibility
• Growth Strategy

Question 5

what can offshoring cause?

Answer 5

CLUSTERS

• Emergence of clusters specialized in offshoring activities
• Different regions gained recognition for different types of expertise

Question 6

What are some main offshoring destinations/clusters?

Answer 6

Main destinations: India, China, and the Philippines

• Bangalore: Call centers
• Latin America: IT-Associated clusters
• Mumbai: Investment banks
• Dubai and the UAE: Infrastructures, low taxes
• Cape Town: Qualified workforce and insurance services
• Morocco: Customer service
• France and Spain: Multilingual workforce
• Vietnam: Math graduates who are also multilingual

Question 7

Benefits of offshoring clusters

Answer 7

• Firm-level productivity increases
• Industry-level productivity increases

Question 8

Risks of offshoring clusters (7)

Answer 8

• First limited number of places => Demand > Supply
• Unstable currencies
• Unstable wages
• Intense competition for employees
• Regulatory limits
• Inflation in these target regions
• High turnover of labor

Question 9

What are the 5 criteria for choice making process with regards to offshoring?

Answer 9

1. Calculate costs of services
2. Forecast availability of skilled labor
3. Estimate local market potential
4. Evaluate quality of infrastructure
5. Assess country’s risk profile, political and business environment

Question 10

What are the three global strategies?

Answer 10

1. Adaptation
2. Aggregation
3. Arbitrage

Question 11

Offshoring falls under which international strategy? Why?

Answer 11

Arbitrage

• Offshoring exploits differences between countries
• Most offshoring processes are associated with Arbitrage.
• The decision to go for offshoring must take into account the company’s comparative advantage.

Question 12

What are the 6 steps to formulate a strategy that includes offshoring?

Answer 12

1. Think big picture, not item by item
2. Decide what you want to outsource (as in offshoring) and how
3. Examine destinations carefully
4. Adapt to the new reality
5. Develop Local talent
6. Govern your offshored business

Question 13

describe Think big picture, not item by item

Answer 13

Fit between offshoring as operating strategy and overall global strategy

Question 14

describe “what you want to outsource (as in offshoring) and how”

Answer 14

• Focus on what process you want to outsource
• Identify interdependencies – How interdependent is customer service and re-sell in case of home internet?
• Identify the most outsourceable

Question 15

describe “examine destinations carefully”

Answer 15

• Labor costs
• Talent availability
• Market potential
• Infrastructure quality
• Acceptable risks
• Environmental factors

Question 16

describe “adapt to the new reality”

Answer 16

• Long learning curve
• Cost of learning

Question 17

describe “develop local talent”

Answer 17

cost of training

Question 18

describe “govern your offshored business”

Answer 18

Create management mechanisms to oversee activities