Offshoring

The term offshoring is a form of relocation of entrepreneurial functions and processes abroad. Trigger for an offshoring decision are usually the more favorable conditions abroad, especially in labor costs. The concept has received in Europe, particularly because of the problem of job relocation to Eastern European and Asian countries a negative interpretation.

In the computer industry, the term is often used in conjunction with the locations of servers or services. The decision for this shift is usually based on a particular legal or policy of a state that favors their own projects.

The term offshoring can be defined differently in contrast to the concepts of outsourcing, nearshoring and Onshoring.

Offshoring vs. outsourcing

Offshoring refers to the geographical relocation of corporate functions while outsourcing refers to the organizational shift. There is no compelling substantive link between offshoring and outsourcing. The relocation of corporate functions abroad can take place within a company (so-called internal or captive offshoring ) or the functions can be outsourced to an independent company abroad ( so-called offshore outsourcing). In addition to these two pure Offshoringformen there is a range of intermediate forms such as joint venture with local partners abroad.

Farshoring vs. nearshoring

Often there is also an additional geographical delimitation of the concept of offshoring; as Farshoring be restrictive only relocation to distant lands (as seen from Europe, mainly countries in the Americas or Asia) understood. Distinguished from the nearshoring - the displacement of tasks and functions to nearby countries. Nearshoring is often regarded in Europe as a sensible alternative to Farshoring. In particular the countries of the EU enlargement come this question from the perspective of German-speaking countries. Low cultural differences, geographical proximity and the minimum time displacement are some of the advantages of these countries.

Offshoring vs. Onshoring

Under Onshoring refers to the outsourcing of manufacturing or services within the country of origin of the client. Offshoring always refers to foreign countries. As an example of Onshoring you can use a car factory, the doors from another company purchases, which is located in the same city. The proximity makes it constitutes an advantage

Sectors and destination countries

In addition to multi-national corporations and big companies increasingly operate even medium-sized companies offshoring. The scope of the outsourced activities goes from individual sub- functions to entire departments and operating locations. The sites are often located in emerging countries with relatively low wage levels (also called low-wage countries ). German company resources mainly to Eastern Europe and Asia; but not irrelevant is also the outsourcing to other EU countries.

A frequently cited example is the outsourcing of IT application development to India, where numerous, especially in the metropolis of Bangalore provider of IT services (eg, Covansys, Infosys, Wipro Technologies, Tata Consultancy Services ( TCS), NIIT Technologies ), but also daughters of U.S. (including IBM and Microsoft) and European companies (including SAP and Siemens) are located. Increasingly, the People's Republic of China profiled as offshoring country. Meanwhile go also on the provider of IT services to build its own subsidiaries in high-wage countries in order to secure orders, which are then executed in the home countries. Meanwhile, specialized service providers in Germany have formed which take over the offshoring of the manufacturing industry, for example, Althom.

In addition, there are now specialists in the optimization and control of respective offshore projects are focused and provide dedicated tools for this purpose. For example, a B2B marketplace for offshore software development in the search for suitable offshore partners.

Source countries and the importance of offshoring

Compared with the U.S. and UK offshoring in Germany is so far relatively weak, which is not least due to the language and cultural barriers: as English in India is one of the official languages ​​, there are advantages here for the acquisition of orders from Anglo-American countries.

The McKinsey Global Institute estimates based on studies that approximately 1.5 million service jobs have moved from developed countries in 2003. This number is expected to increase to 4.1 million by 2008. To put these figures into context, it should be noted that change in America alone per month over 4 million people their jobs. In addition, studies of the OECD, where the exports of services serve as a basis for the estimates that three countries in the top ten for today's EU belong. This is to show that there are strong tendencies in Europe to operate offshoring within Europe. Even so, in OECD estimates that up to 20 percent of the jobs in the 15 EU countries prior to the expansion to get lost in the U.S., Canada and Australia by offshoring.

Review of offshoring

In the economic approach, among others, labor cost savings, access to qualified personnel and the advantage of time differences be understood as benefits of offshoring. At the same time creates new offshoring costs and risks: increased administration and communication overhead, intercultural misunderstandings, inadequate infrastructure and many other factors may limit the benefits of offshoring or even overcompensate depending on the type of displaced corporate function. In particular, pay attention to controlling the supply operation.

In cooperation with Indian IT service expert on the subject refer to the following commonly encountered problems: significantly longer lead times, lack of punctuality and quality of work, high need for explanation in the allocation of tasks, high staff turnover, lack of project managers, late notification of the client with problems and not -compliance with commitments. Conversely criticize Indian IT service to their clients overseas often imprecise or ambiguous work requirements.

Due to the direct impact on jobs offshoring is greatly discussed at the political level. Critics, especially critics of globalization and trade unions fear that lost by offshoring many jobs in Europe and a ruinous competition among states is created. In a worst-case scenario, they predict social states that existed at the time of the first phase of industrialization in Central Europe. Naomi Klein sits down in her book " No Logo " critical outsourcing apart. It sets out how large U.S. clothing manufacturers such as The GAP, Nike, Levi's and Esprit relocate production to low-wage countries, while it points to the simple European standards working conditions.

This criticism in turn has been cited that the outsourcing of activities to lower-cost providers strengthens the competitiveness of local companies and at the same time ensures domestic jobs. By mixing calculation it should be possible to offer products and services at internationally competitive prices. With the rising wealth of the offshoring countries, it is expected that these import more goods from the industrialized countries. Considering that Germany is below average profits from offshoring, the highly regulated labor market in Germany is regularly blamed: The emigration of some jobs can not be prevented, in part, entire industries will disappear.