First, some companies believe that the cost savings from offshore outsourcing is considerable. For example, because of differences in wage rates, labor costs are typically lower in offshore locations; and cheaper overhead expenses such as utilities, real estate, and taxes may also be beneficial. One study showed that companies can save up to 45% in total costs when moving operations offshore.
In addition, offshore outsourcing can free up cash flow for reinvestment in the company’s business. By taking advantage of the lower costs abroad, companies can obtain the same products and services for less money. Some companies also improve their productivity and cut expenses by outsourcing administrative or research and development tasks. Offshore outsourcing can also present opportunities to take advantage of new technology, new markets, and access to additional resources in less developed countries.
Offshore outsourcing can also provide access to a wider range of qualified resources. Companies in different countries have different specializations, and accessing workers with special skills can be beneficial. For example, many Indian technology companies specialize in software development and have developed the skills to produce high-quality technology products and services.
Furthermore, offshore outsourcing makes companies more efficient and competitive. Companies that outsource manufacturing overseas can take full advantage of the economies of scale and can produce bulk goods faster and more cheaply than local competitors. Companies can improve their own products and services through the use of local knowledge and experience, as well as through collaborations with employees abroad.
At present, offshore outsourcing is used widely in many industries, ranging from software and IT to accounting and administrative services. Companies that embrace offshore outsourcing stand to gain a competitive advantage by taking advantage of the cost savings and access to new resources abroad. As companies grow, offshore outsourcing can be used to manage costs and maintain a competitive edge in the global marketplace.
