Production Offshoring
Production offshoring is the relocation of physical manufacturing processes to a lower-cost destination. Examples include the manufacturing of electronic parts, apparel, toys and other consumer goods in China, Vietnam, etc. It really started evolving when the NAFTA made it easier for manufacturers to shift production facilities from the U.S. to Mexico. This trend later shifted to China—its low prices made the country an attractive option for reducing the costs.
Services Offshoring
Services offshoring is essentially hiring third party service providers to handle work that would be normally done inside the company. Some examples include software and hardware engineering, accounting, payroll processing, marketing, research and development, equity analysis, tax-return processing, radiological analysis, and medical transcription. Popular offshoring destinations include Brazil, The Philippines, and South Africa.
Benefits of Offshoring
- Reduce costs through various factors like very low wage rates, cheap loans, ready availability of land and factories thus increasing revenues
- Control capital costs: convert fixed costs into variable costs
- Expand market share and product offerings
- Improve efficiency
- Optimize existing resources and focus on your core business
- Stay competitive by raising productivity
The debate over offshoring and whether it’s beneficial for the U.S. has been going on for years. The answer is definitely yes! Here’s why: The truth is that more and more companies are sending jobs to countries like India and China which causes job losses in America. So how can that possibly be beneficial? Such short-term disruptions should be weighed against the much larger advantages for consumers and businesses in the long run. Outsourcing jobs abroad helps keep companies profitable and therefore they can offer new and better services, improved products, and lower prices. In addition, they are able to invest more into innovative technologies and business ideas thus creating new and higher valued jobs.
Offshoring in Numbers
A 2003 study showed that offshoring creates a stronger economy for both the U.S. and the country receiving the jobs. For example, for every dollar outsourced to India, the United States gained as much as $1.14 in return.
For every dollar of corporate spending that moves offshore, U.S. companies save 58 cents. Moreover, the quality of the services they buy is often higher, which enables companies to hire more qualified people and spend more on supervision and training. One British bank’s call-center agents in India not only process 20 percent more transactions than their counterparts in the United Kingdom, but also do so 3 percent more accurately.
Research done by Catherine Mann of the Institute for International Economics in Washington, DC discovered that the global sourcing of components has reduced the cost of IT hardware by up to 30 percent since 1995, boosting demand and adding as much as $230 billion to the U.S. GDP. Additionally, thanks to corporate and individual buyers, exports from the United States to India stood at $5 billion in 2003 compared to $3.7 billion in 2000; they rose by 22 percent from 2002 to 2003 alone.
U.S. manufacturing employment shrank by 2 million jobs over 20 years—but net employment increased by 43 million jobs in other areas such as educational and health services, professional and business services, trade and transport, government, leisure and hospitality, and financial services. Over the same period, manufacturing output increased despite the decline in the number of manufacturing workers because factories became more productive. Higher productivity means a higher national income and a higher standard of living.
Opportunities to generate higher-value-added jobs by redeploying labor and investing capital are on the rise. The Bureau of Labor Statistics estimates that 22 million new U.S. jobs mostly in business services, health care, social services, transportation, and communications will be created in the period from 2000 to 2010. Forrester Research predicts that by 2015, roughly 3.3 million U.S. business-processing jobs will be performed abroad.
Critics point out that more than 2,000,000 U.S. jobs have been lost since 2000. However, most of these were in manufacturing, not services. Moreover, employment in IT—supposedly one of the sectors hardest hit by offshoring—expanded from 1999 to 2002 by 108,000 positions (out of roughly 3,000,000). While 71,000 computer-programming jobs disappeared, jobs in other computer fields multiplied. The number of higher-paid positions for software engineers increased by 115,000, while the number of jobs for systems analysts and network administrators rose by 40,000 and 27,880, respectively.
Offshoring Solutions
Ameri Associates offers a full range of offshoring and outsourcing solutions. Our team has in-depth knowledge and vast experience in various fields, some of which are:
- Business Process Outsourcing (BPO)
BPO is implemented as a cost-saving measure for tasks that a company requires but does not depend upon to maintain their position in the marketplace. Nowadays companies are rapidly adopting business process outsourcing (BPO) as a viable means to reduce operating costs, focus on core competencies, and move from a fixed to a variable cost model.
BPO is divided into two categories:
– back office outsourcing which includes internal business functions such as billing or purchasing
– front office outsourcing which includes customer-related services such as marketing or tech support
BPO that is contracted outside a company’s own country is called offshore outsourcing. Our business process outsourcing services include call centers, human resources, accounting, and payroll outsourcing.
- Information Technology Outsourcing
Ameri Associates offers customized solutions and in-depth knowledge for every stage of the IT outsourcing cycle. A growing number of business enterprises are turning to IT outsourcing, seen as a viable means of cutting costs and improving services.
- Finance & Accounting
Outsourcing back office functions lets organizations reduce time spent on non-core functions and focus on key strategies, resulting in cost reduction and total process improvement of finance and accounting functions. Our knowledgeable accountants have experience in every stage of the finance and accounting outsourcing cycle.
- Human Resource Outsourcing (HRO)
Major companies like IBM, PepsiCo, Procter & Gamble, and U.S. federal and state governments spend billions each year outsourcing HR functions. The question is no longer if your organization will consider outsourcing; it’s rather when? Options range from a single short-term project to a longer-term management agreement.
Services include:
- Assisting our clients in assessment of their offshoring needs, most suitable country, desired services, etc.
- Company formation services and preparation of corporate documents
- Full range of secretarial services, telephone answering, mail forwarding
- Company management and financial management services
- Company communications services
- Administrative and documentation services including arranging for the notarization and legalization of corporate documentation, invoicing, auditing, opening of corporate and private accounts, tax and accounting, etc.
- Patents, trademark, and ship registration services
- Assistance in opening accounts with well-known financial institutions