Offshore or Die

Offshore or Die

“…not a single activity is immune … [ to offshore ].”

Offshoring is primarily an executive choice to lower operational costs. This is the cost strategy of the Offshore Stage Model.

Many industries linked to online services consider offshoring not just an option but a necessity. Some call it “Offshore or Die”.

Match your competitor's offshoring strategy or fail
When one company’s cost efficiencies allow it to lower prices or expand its competitive options, other companies must match their competitor’s strategy or fail.
Offshoring now factors into the larger picture of hyper-competition.
Companies are drawn into faster and faster cycles of competitive responses and reactions to remain cost-competitive and financially viable.
In effect, not offshoring may become a strategic peril

Resisting offshoring can, at times, be a matter of survival. One example is Zenith Electronics, one of America’s largest television manufacturers. This company resisted offshoring for decades–while slowly shrinking–until it disappeared completely.

The primary focus of companies that undertake offshoring is cost reduction.
At later stages of offshoring, companies can reap some other benefits. Some of those benefits are the following:
One of the key advantages of offshoring is the ability of offshoring companies to reduce the start and completion time of projects.
The abundant supply of labour offshore allows the companies to have a better worker-to-task ratio.
Companies that succeed in tapping offshore talent reach another great strategic goal that other companies cannot: accessing talent that drives innovation.

For such companies, success stems from innovation and innovative abilities come from talent- their most creative and brilliant employees, researchers and brains.

Firms that expand abroad to tap offshore talent are considered “Knowledge Seekers.” Their concern is not just lower wages but also new thoughts.

In the past, such companies from developed nations would tap foreign talent from other developed countries. Later, this focus shifted towards developing countries like India, Pakistan, Israel etc.ย 

Firms that are Knowledge Seekers

Offshoring Information Technology: Sourcing and Outsourcing,

Erran Carmel, โ€ŽPaul Tjia

Cons of Outsourcing in Contrast to Offshoring

Outsourcing will require that you share your sensitive financial data with an external provider. This can expose the business to data breaches.

Outsourcing can lead to diminishing control over day-to-day accounting operations because the processes are managed externally.

Missing priority for lack of oversight can affect the timeliness of financial reports, which has implications for strategy and decision-making.

Since there is likely to be a distance between the business and the outsourcing providers, effective communication may not be impossible.

It is probable that the team you outsource lacks in-depth knowledge of the specific industry you are in. There may also be regulatory requirements that can lead to errors.

Moreover, frequent turnover in your outsourcing to team may affect the consistency and quality of the work.

Integrating outsourced accounting services with in-house systems or software may be time-consuming. Such problems can lead to complexity and time waste.

In addition, compatibility issues with technology processes or reporting formats can obstruct smooth operations.

Overreliance on a third party for essential financial functions can create vulnerability and lead to problems if the third-party company has operational gaps.
It is possible that the outsourcing providers follow a one-size-fits-all approach to accounting tasks, which may not suit your unique business needs and goals.
So, extra time may be needed to build a personalized relationship with the external team.
What do you need for successful offshoring

Standardized development processes that are:

Such improvements will reduce the error rate and enhance cost savings.
Moreover, such processes reduce communication difficulties by structuring the process.
Conclusion

Outsourcing looks handy and promising, but there are so many hidden challenges that can surface once you get into the process. Offshoring also looks challenging, but it can have more rewards if you keep control over your off-shore places; also you can leverage manyfold, given the fact that covering such distances naturally has many benefits.

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