Relocating a business process like manufacturing for example, from one country to another is what defines off shoring. In an economic climate that is not too conducive to business, cost reduction is a primary factor being considered by most organizations. Western countries have already begun off-shoring (outsourcing) work to countries like India, Philippines and China because the low operation costs. The main advantage is the huge savings in labor cost, which is far lower than companies would pay in the western world.
Cost Savings
There is no denying the primary advantage of off shoring is cost saving for the organization. The obvious savings are made due to lower labor rates and employee benefits. However, there are savings not so visible and these include taxes, work rules, plant cost, equipment cost, environmental and safety standards. There is an indirect cost saving as well in the form of the company's physical presence in a large, expanding market, like China for example. This is leveraged to increase the company's sales and increase the bottom line, namely profits.
Lower Staff Cost
Lower staff costs is a big benefit and major attraction to companies to choose off shoring. On-shore staff cost the company a lot more than just a paycheck. These additional costs do not exist for off-shore staff and this is in addition to the fact that they work for a fraction of the cost of on-shore staff.
Focus On Increased Profits
Off shoring to countries that have highly skilled labor available at a fraction of the cost in the company's own country will result in the company being able to focus all its available resources on achieving business goals and exceeding profit expectations. India, for example, is a country with highly skilled IT professionals who can do the job at a fraction of the cost when compared to U.S. workers. Having off shored the jobs, the company has in effect decreased the workload of its on-shore workers. These resources can now be concentrated on improving profits in various ways.
Saving On Office Space and Equipment
Off shoring enables companies to increase the workforce at a nominal cost without having to incur the additional burden of increasing office space and investing in new equipment.There is no need to pay expensive lease fees for space and invest in workstations, computers, software, communication and other business equipment. Other indirect costs like dining facilities, games room, beverages and other items are all saved when companies choose to off-shore work.
