Who Really Benefit in Offshore Outsourcing?

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Most of us know what offshore outsourcing is. Offshore outsourcing is also called as a type of business process outsourcing (BPO), is the exporting of IT-related work from the United States and other developed countries to areas of the world where there is both political stability and lower labor costs or tax savings.

I recently read the article from McKinsey Institute, says that the savings enjoyed by companies that move labor-intensive service industry work from the United States to countries with lower labor costs have triggered an mass departure of US business-processing jobs.

Some analysts project that by 2015 roughly 3.3 million of them will have moved abroad. This prospect has prompted calls for the government to restrict offshoring. But they overlook the benefits that build up to the US economy from it.

This is a really mass destruction for the US economy because of this issue that they have been experiencing right now. This is also a good news for countries that really dominating in offshore outsourcing as well, especially India and Philippines.

A study by the McKinsey Global Institute details the wide positive economic benefits to the US economy from offshoring.

Beyond Offshoring

Companies that send their back-office jobs offshore often cut their labor costs by as much as half. But new research by the McKinsey Global Institute finds that these companies risk leaving billions of dollars in savings behind if they just replicate what they do at home in countries where labor is cheap.

The savviest operators redesign business processes to use automation and take full advantage of the new environment’s potential.

Transforming business processes as part of a strategy to offshore back-office functions can release huge new revenue opportunities even more valuable than the obvious labor cost savings that come with offshoring.

Outsourcing: Affected US Economy Recession?

I recently read in the news that US economy’s downturn might affect outsourcing. We know that US economy is involved vastly in most of the world economies, and it says that any major slow down might lead to a global downturn. If this happens in the US economy, there will be a huge downturn to the offshore outsourcing countries, especially India, Ireland, South Africa and the Philippines, who have benefited from outsourcing because of the low-cost of labor; and wherein most of the companies are from the US.

Slowing down of US economy means that companies, industries, and organizations in the US that outsource, are evaluating the recessionary trends. This might automatically translate into more interest in offshore outsourcing.

Outsourcing could be a strong business proposition in good times, and it’s an even stronger proposition when bad times last. Offshoring will grow over the long term, since it drives cost savings. However, this might not be quite so in the short term.

With the advert of the outsourcing trend, many IT/ITES companies have been joining the wave of outsourcing, growing by leaps and bounds.

It was like the outsourcing industry around the world was run as a subsidiary of the US/European economy. However, since the last 6 months, the US economy has undergone major changes. There had been a severe sub prime crisis hitting the economy, with the US dollar value depreciating to record levels.

The credit crunch might have a positive or negative effect on the outsourcing industry. Downturn in the US economy plus possible recession means technology and outsourcing as solutions to the need to slash overheads and minimize any negative impact on the bottom line.

The truth is that the US economy is at an unpredictable tipping point. If a very serious recession hits, then companies might actually scale back on outsourcing – this would be the resolve of service companies having less customers, therefore needing less service provision and therefore believing that a scaled-down internal team would suffice as opposed to an outsourced department.