Offshoring – Outsourcing !
Before talking about my own experiences lets get the terms defined in the sense that I gonna use them here.
Offshoring and Outsourcing – The terms has been used in some different areas and has been misunderstanding
in several occasions the past years. In this case I gonna use the terms in relation to the IT-business.
Lets first see what Wiki`says about the definitions:
” Offshoring describes the relocation by a company of a business process from one country to another — typically an operational process, such as manufacturing, or supporting processes, such as accounting. Even state governments employ offshoring. Outsourcing is subcontracting a service, such as product design or manufacturing, to a third-party company. The decision whether to outsource or to do inhouse is often based upon achieving a lower production cost, making better use of available resources, focussing energy on the core competencies of a particular business, or just making more efficient use of labor, capital, information technology or land resources. It is essentially a division of labour. Outsourcing became part of the business lexicon during the 1980s.”
Offshoring – A natural global must in business ?
In the last 40 years this theme has been quite a big part of the discussion in developing a competitive business strategy in Europe. It started with the textile industry in the 1970s followed by the furniture, metallic and the electronic industries up in the 1980s and 1990s. In the beginning of the outsourcing era it was the manual but often simple jobs that was “exported” to countries with lower employee costs. Today we are mostly talking about outsourcing hi advanced technologies, programming and producing of the electronic devices and gadgets that has been a part of our daily life.
Working with outsourcing in the furniture industri:
My first experience with outsourcing was when I worked for Technological Information Center in Denmark. It was in 1996-2001. We had a project with a group of wooden furniture companies that was in the situation that if they couldn’t reduce production cost anymore so they had 2 choices. One, to produce only high end wooden furniture for a much smaller market with a far higher risk. Or secondly, to send most of the labour work to low cost countries. The feeling many workers in the furniture industry got was ofcourse a fear for loosing their jobs and deep concerns about their future.
The project task was to establish a re-education model and at the same time to improve the product development and introduce the furniture companies to use designers to help them to differ more from the low end and standard furniture and if possible add new concepts that would open up to new markets.
The years after has shown that most of the companies had success to upgrade their workers and a lot of new jobs was created in the fields of design , sales and marketing. The fear of loosing jobs in Denmark dissapeared over the years as
the outcome from outsourcing manual work was that it created even more jobs in Denmark than was lost !
Outsorcing internet typing jobs:
Second experience was when I as a self employed Business Advisor had the job to outsource data work to Romania in 2001 for a company that had more than 10000 products and going from a typical hardware company using catalogues to a online E-commerce business. Establishing a data company in Romania made me really understand what its about to make a offshore team and the challenge to convince myself and the client that it was a good idea.
The job was done after 5 months with success and with a net saving of 61% of the cost it was estimated to have if it was made in Denmark. 
The idea to go online was a part of the business strategy in many companies at these years and in this case it showed an
increase of 15% of the total sales after the first year online.
The increase of the sales created new jobs in the company in
packing and online support of the clients. After 2 years the
increase in sales was 20% and more jobs was created.
Outsourcing and Offshoring software developement and Callcenter jobs:
In CodeLean Inc. the company where Im a freelance consultant today Im looking at the latest experiences in working with establishing offshore teams. Its gonna be my task as an consultant to fulfill the requirements from any global clients to achieve a cost beneficial and high quality in software development projects. Also we are able to establish any specific services for the raising demands of online services. In our office in Manila we can establish a team for any IT related project in a couple of days recruiting from our network of programmers, graphic designers, network and database specialists as well as hot line and call center staff.
I can recommend to read this interesting study about “Offshoring” :
PhD Defence: Offshoring of Advanced and High-Value Technical Services
by: Peter D. Ørberg Jensen