Outsourcing is referred to as the process whereby a company hires someone from the outside to perform duties that are majorly handled by the internal staff. Additionally, it can also be an agreement in which a company hires another company to be accountable for its existing or new operations. Offshore, on the other hand, is where a company moves its services overseas. This can be of greater advantage to both the company and its staff. The aim of this paper is to look at the reasons why do companies outsource and go offshore.
Reasons for Outsourcing
Sharing risk with a partner company
Firstly, the main reason why companies outsource is to spread and share their risks. When a company is faced with many risks, it can decide to hire another company that will be responsible for handling some of their tasks. This is an advantage in that when the company is faced with risk, it shares the risk with the partner company. Both their assets and services will be affected as compared to when a company is operating on its own.
Maximizing use of External Resources
An individual company’s resources may not be sufficient and enough for it to achieve its long term objectives. Having an outside company partnering with them enables them to extensively utilize the resources from the subcontracted company. They can come with new ideas, technologies and ways of doing things making it effective and easier for staff members to work in a conducive environment, in turn achieving their everyday goals. The company on the other hand benefits in such a way that it can take advantage of the external resources to reach their desired goals.
Improves Company Focus
Having a combined goal enables the company to focus and work extra hard in achieving more than they could have achieved when working alone. They both work towards accomplishing a common goal and creating new ideas. Their focus is shifted from putting much attention and resources in employing new staff members, to attaining the best that they can with the new resources that they have.
Reasons why Companies go Offshore
Expand their network
Firstly, being that these companies have new International clients, they build a deeper network with them. This improves the relationship between the companies and their clients and it helps in building trust and confidence. Expansion of the network can be the best approach required for penetrating the market. This is because there is a large number of prospective clienteles that are willing to pay money for the services that are being offered.
Administration of Offshore Companies Are Flexible
The administration is in charge of giving investors unrestrained access to international markets. This creates an opportunity for the company to penetrate the foreign market. Being that one holds his or her property in another country, enables him or her to internationalize his or her savings. Additionally, moving some of the company’s assets and services overseas offers a platform that is convenient for holding and changing foreign currencies. One does not need to carry his or her local currency in bulk because they can easily change to the currency of the country in which they are conducting their business.
Pros of Offshore Software Development
Improves Innovation and Quality
Every company has its requirements when selecting people that are suitable for a particular post. Depending on the requirement, the company can be lucky to secure highly qualified personnel who have the highest knowledge and standard in software development. Outsourcing creates team building in that the staff will be willing to work with the new staff in place in order to achieve a common goal. It also benefits the company in that the resources that could have been used in training individuals for various positions which might take many years is channeled in another important thing as there is interaction with the qualified staff.
Simplified Recruitment Exercises
Choosing the right person for a specific job has been made easier as this is done by assigning and escalating the search globally. Recruitment and staffing is made easier, depending on the software development chosen, by providing the best professionals around the world. Those who would have qualifies for the position will be chosen at random depending on their capabilities, efficiency and timely submission of tasks. There is no need of choosing individuals then training them as this is a waste of time and resources of the company.
Reduces Costs in Salaries and Infrastructure
Lastly, the majority of employees can demand high salaries without delivering a positive result. Moving the company’s software in a different country is cost effective as the salaries are paid differently in different countries. High salaries can interfere with the budget of the company as the majority of the high ranking staff will be earning much as compared to those who are putting in more work. This can create differences in the work environment which will eventually reduce the output of the firm.
In Conclusion, outsourcing has proved to be of greater advantage to the company as it requires minimum resources as compared to scenarios where the company is operating as a single entity. There is the advantage of risk sharing and reduction and control of operating costs. Additionally, offshore companies have made recruitment and selection easier as those who are qualified are the ones hired. It has reduced biasness in the work area in that there is no favoritism and tribalism among the staff members. Innovation is enhanced as both the companies from different countries will bring their new ideas together and come up with one final idea that benefits the company.