What is Offshore IT Outsourcing?

Offshore IT outsourcing is the business practice of contracting information technology (IT) work out to staff who are located in foreign countries, and typically work for lower wage rates. In developed countries, it is common for businesses to avoid paying relatively high salaries to domestic IT workers by outsourcing work. IT is uniquely suited to offshore outsourcing as both programming and software support are relatively easy to do remotely.

It is only in the last several decades that offshore IT outsourcing has become feasible, let alone attractive, to companies in the developed world. The ever-increasing integration of networked devices means workers in countries such as India and China, as well as Eastern Europe, can connect to systems around the globe, virtually instantaneously, and perform all but the most intricate IT work via the Internet. While physical hardware support, such as replacing a computer hard drive, must still be done in person, most operating systems and software packages are now developed with remote support in mind.

In technical terms, offshore IT outsourcing only occurs when a company hires outside contractors to complete work for them. It does not apply when a company moves part of its operations overseas, or merges with an overseas business. It is different in nature, for instance, to companies that set up their manufacturing operations in southeast Asian countries, such as Vietnam or Singapore. Such behavior is not considered outsourcing, but rather is known as offshoring.

India is commonly cited as the symbol of the offshore IT outsourcing trend in the western hemisphere. India has a large comparative advantage over North American and European countries when it comes to a low cost of living, and it also benefits from a very high quality of education. In addition, English is a primary language of the country. Skilled Indian IT workers can undercut their western counterparts in terms of salary, while still enjoying a good quality of life, in relative terms.

In recent years, offshore IT outsourcing has become a symbol of corporate indifference to domestic workforces and local economic investment. In this way it has become a popular political issue in certain countries, including the United States. An increasing number of political candidates run on platforms that highlight job protection, and target companies that engage in practices such as offshore IT outsourcing. It is closely related to the global economic issues of free trade, fair trade, and protectionism.