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What Are the Pros and Cons of Offshore Outsourcing?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 March 2014
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The concept of offshore outsourcing is one that causes a great deal of controversy among different people. Some find this approach to doing business extremely cost-effective and even essential to keeping a company afloat. Others are opposed to offshore outsourcing, noting the flow of jobs to international locations and other factors that sometimes lead to issues with providing quality customer service. There are in fact a number of pros and cons that a company should weigh before making a decision to outsource one or more functions to an international location.

Proponents of offshore outsourcing often point to the fact that a great deal of money can be saved using this method. This is especially true with manufacturing situations that make it possible to produce goods at lower costs, owing to less stringent taxes and regulations that apply in some countries. At the same time, the process makes it possible to benefit from lower labor costs and the ability to forego extensive benefit packages that would be necessary in a domestic production situation. Lower production costs mean it is possible to produce each finished good for less money, making it easier to sell those goods for competitive prices in the marketplace. As a result, the company that uses offshore outsourcing for the manufacture of goods stands to enjoy a higher profit margin.

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There are also benefits to using offshore outsourcing for other functions. For example, customer service and support can easily be provided using professionals located at an international location. Offshore IT outsourcing is also a possibility, allowing businesses to make use of Information Technology expertise at a lower cost. Other essential tasks in the business operation may also be outsourced to an international location and accessed remotely, including clerical support, saving the company a great deal of money.

While there are a number of advantages to offshore outsourcing, there are also some potential drawbacks. This is especially the case when language or culture barriers complicate the process of communication. For example, customers who are seeking service and support via a customer service line and are unable to understand the responses from the support personnel are likely to become frustrated and cease doing business with the company. Concerns about the impact of this type of outsourcing on the ability of a nation to effectively produce its own goods internally has also led to some backlash in specific industries that create poor public relations for companies who choose these solutions. Since public perceptions can affect sales, many companies weigh the benefits of offshore outsourcing with the potential damage to their reputations and their bottom lines before choosing what functions to outsource and which ones to continue managing domestically.

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