Factors that influence offshore decisions

The fundamental idea behind off-shoring is capitalizing on lower cost labour in less developed countries. Outsourcing is one approach to attaining those benefits. But it is also possible for a company to set up its own off-shore operation – either wholly-owned, or as a joint venture with a local partner.

Many companies choose to outsource in the short-term because it is fast and convenient, and appears to have lower risk. But retaining ownership and control has its own advantages – especially over the long-term. In fact, a number of companies that started by outsourcing their off-shore operations are already planning to shift those activities to a wholly-owned off-shore subsidiary.

Off-shoring is rapidly becoming one of the most important business trends. The question used to be, “Why should we off-shore?” But now companies are more likely to ask, “What should we off-shore? And how should we do it?”

The following factors influence the offshore locations:

• Wage rate and Wage inflation
• Experience of off-shoring and maturity of the industry
• Fluency in English and other major languages
• Education level (general and technical)
• Technical infrastructure and stability of infrastructure
• Existing trade relationships
• Proximity (geographic/time zone)
• Historical, social and cultural ties
• Size of workforce
• Maturity of legal structure
• Financial controls
• Perceived work ethic
• Climate.
• Government support
• Level of political and social stability
• Economic stability
• Protection of intellectual property
• Data security and privacy issues
• Cost comparisons
• Access to skilled workers
• Business ethics and practices
• Cultural fit
• Access to technology suppliers and expertise

An outsourced call centre survey conducted by PricewaterhouseCoopers lists the following most frequently mentioned criteria given by companies in evaluating an outsourcer:

• Guaranteeing specific services levels
• Proven track-record in BPO
• Specialising in BPO
• Maintaining close contact
• Has vertical industry experience
• Cost saving guarantees
• Ongoing training
• Ensuring no conflicting contracting
• Commitment to research and development
• Centre of excellence
• Effective transition HR strategy
• Compatible corporate culture


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