Part 1 - Offshoring basics: definitions, benefits, and challenges
By Aaron Green,
My company, Professional Staffing Group, recently launched a new firm,
PSG Offshore Resources. Offshore outsourcing, or offshoring, is currently a major growth area -
- and issue -- in the staffing world, hence this two-part column. In Part 1, I will define offshoring,
its benefits and challenges. In
, I will take a look at how small- and mid-sized companies
are now taking advantage of offshoring opportunities.]
We hear a lot these days about "outsourcing" and "offshoring." But what do these terms mean,
and why are we hearing so much about them?
First of all, let's be clear on the terminology:
- "Outsourcing" refers to the transfer of non-core operations from internal
employees to an external organization. This transfer of non-core operations allows the
company that outsources the work to focus on its core business. The organization that the
work is outsourced to will typically have expertise in a given area, allowing it to add
value and provide cost savings. For instance, many companies outsource payroll to one of
the many available payroll vendors. The payroll vendors are able to add value in the area
of payroll in a way that internal payroll departments can't achieve. Another example is
human resources departments that outsource background checks to vendors specializing
in this area rather than driving to courthouses and checking criminal records themselves.
- The term "offshore" refers to where the work is being performed
geographically. In other words, if a task is "offshored," then the task is being performed
in another country.
- "Offshore outsourcing" means that work is being performed by
an external company in another country overseas. Many people simply refer to this as
"offshoring." Offshoring is taking place all over the world. The more common locations
are India, China, the Philippines, Eastern Europe and South America. A derivative of
offshore is "near shore" where work from the U.S. is performed in Canada or Mexico.
A trend that is here to stay
The current offshore outsourcing trend started in the 1970s when large multinational companies
like General Electric began sending manufacturing overseas. White collar jobs such as
programming came next and then companies began outsourcing their call centers to overseas
vendors. Offshoring has become much easier to do and as we shall see, now even small
companies hire offshore staff in order to achieve their business goals.
A variety of jobs are offshored, including some that many people never could have imagined
going overseas. Not only are jobs in finance, information technology, human resources, scientific
fields, and graphic design commonly offshored, but now lawyers are doing research and doctors