Wednesday, August 09, 2006

Offshore Outsourcing

Certain companies contract their businesses or part of their businesses to other companies located in foreign countries. This business procedure is called offshore outsourcing. Offshore outsourcing has become a very feasible trend for companies that are expanding or just trying to reduce their overhead expenses.

It makes good economical sense to outsource business to a developing country. Developing countries like India have the human resources to conduct businesses, but they may not have the capital to set up huge infrastructures. Such offshore countries are usually willing to do business at a fraction of the cost, as they pay their employees less and also have an easier structure of tax payments. This profit carries on to the outsourcing company.

Another advantage is that the portion of the business outsourced (which may be sales, telemarketing, research, etc.) no longer remains the concern of the outsourcing company. The offshore company hires its own experts and professionals. This creates a constructive division of labor that becomes fruitful to both the outsourcing company and the offshore company.

Outsourcing may be a way for a company to lay roots in a foreign country where they may be thinking of expanding. Hence, a company may outsource its business to a company in India in order to understand the prevailing Indian market and to adjudge the Indian customer. This may be a ploy to sooner or later open a branch in India. Huge conglomerates that are perpetually expanding opt for outsourcing as a survey method rather than as a method for garnering more business.
However, if a company has correctly assessed its limitations, then outsourcing may make good business sense. It may also provide dynamism in the economy of a developing country.