The Bottom Line About Offshoring

Filed in archive Best Practice on August 18, 2004

The management guru from About.com is running an interesting series about outsourcing.

Guide F. John Reh, smartly showcases the different between 'outsourcing' and 'offshoring', which are often used interchangeably by many people.

The guide also advises a careful analysis of the end result of the outsourcing move.

Outsourcing work to companies that can do it more efficiently and less expensively makes sense, provided that it is actually less expensive at the bottom line, and not just for the department that wants to outsource. If the marketing department wanted to save mailing costs by having every employee of the company hand carry a marketing piece to everyone in their neighborhood, the CEO would disallow it. The cost savings to the Marketing Department's budget would be more than eaten up by the additional costs to the company for replacing employee who quit because they didn't feel they were hired to do deliveries, of placating potential customers who complained about receiving "junk mail" that was hand-delivered instead of coming through the mail so they could just toss it, of mileage claims from the employees doing the deliveries, etc. It is equally inadvisable for a company to shift their call center to India to save money if they lose more than that from customers who stop buying their product because they can't communicate with the call center reps because of heavy accents. Offshoring makes sense only if it truly saves money at the bottom line.