Off-shoring, offshore outsourcing, near-shoring, co-shoring and information security cost: A comparative study.
The main objective of any individual or group going into business is to make profit. Their profit is the difference between the cost of providing the good or service and the actual cost to the consumer. As more companies venture into the same line of business the competition for customers gets intense thus bringing into play the law of supply and demand. Oversupply of a good or service pushes the price consumer has to pay down. These forces have pushed managers and business strategists into the search for ways to increase the bottom line while reducing cost of good or service delivery.
Using information technology has been a way to maintain business competitive advantage for many of the biggest companies. Typical uses of information technology in business are the automation of payroll, human resource management, key business processes etc. The desire by managers and business owners to increase the bottom line has further pushed them to explore several strategies to further reduce the cost contribution of IT to the total cost of goods and services they provide. Among such strategies include off-shoring, offshore outsourcing, near-shoring and co-shoring all aimed at reducing cost of the information technology used by a company. This paper aims to explore all the above listed strategies and specify the most cost effective measure associated with information security risks to adapt.
Outsourcing is the hiring out of work by a company to a separate existing unit or company with more specialization that can do them more efficiently and less expensively. This helps the company outsourcing work increase profit while shedding work. Over the years businesses have adopted the strategy at several degrees and models. Off-shoring, offshore outsourcing, near-shoring and co-shoring all forms of outsourcing which businesses adopt to reduce the cost they spend on their information technology department.
Off shoring is the moving or relocation of a section of a business to another country or geographical location. The driving force for managers is to take advantage of lower cost of labor or available technology in the offshore location. Managers are constantly seeking ways to lower the increase profit by lowering cost of their goods and services in order to remain competitive because lower costs translate to higher profit, all things being equal. Not only does this strategy help to reduce cost, it also allows the company to provide better goods and/or services as a result of the outsourced part being handled by a more specialized entity. Off-shoring may not mean outsourcing jobs to another separate company but may also mean that a company simply moved a section of its business to another country. Although there are several advantages of off shoring such as lower costs and possibly higher quality of service, there are also disadvantages or negative implications associated with it. The major concern is an economic one and deals with the loss of jobs. Moving jobs outside a country reduces the number of available jobs locally thus contributing to unemployment. Problems can also arise due to long distance between the company and its offshore counterpart. Additional expenses might be introduced because of necessary trips to offshore locations thereby adding to operating cost and ultimately reducing or working against profitability of the company business. The control a company wields over its off shored division is inversely proportional to the distance between the company and the off shore location. (What does onshoring,offshoring,nearshoring mean?, 2010). More simply, the control a company wields over its off-shore counterpart decreases as the distance between them increases. Misunderstandings may arise due to inherent communication problems that accompany long distance collaboration.
On the other hand, near-shoring is the relocation of a part of a business to a location that is relatively near. We quickly notice that problems of distance associated with off shoring are addressed in near-shoring. Other advantages over off shoring include better control of the business process because of closer proximity. Also, shorter distance form partners means lower travel expenses to partner locations especially for companies whose employees have to travel frequently to partner locations. (What does onshoring,offshoring,nearshoring mean?, 2010). Thus, near-shoring affords the ability to effectively and easily collaborate.
Another business strategy is offshore outsourcing which is similar to off-shoring but another company in a relatively far country takes care of the job being outsourced. Many companies outsource work to other companies they feel are cheaper and more specialized.
Additionally, co-shoring is a model which combines off-shoring and on-shoring. “Co-shoring is a new model for implementing IT projects with on-shore and off-shore components”. (Co-shoring, 2010). It combines the advantages of both models and eliminates most of their disadvantages. In terms of information security, a company can choose to manage sensitive part of the business itself while outsourcing other parts of business that need less tight security.
Considering the above options for outsourcing of work, co-shoring is arguably the one that has the lowest information security risks. It pulls advantages from off-shoring and near-shoring into one business model while reducing disadvantages associated with adopting any of them in isolation. For information security concerns, a company can decide to manage jobs that contain sensitive information near-shore instead of moving it to their offshore partners. This helps companies have sufficient control over their data because of the proximity. Furthermore, costs are further reduced especially if the critical jobs that require constant travel are done by near-shore partners and not so critical jobs done off-shore. This contrasts with full off-shoring which may have greater labor cost reduction but greater travel expenses that can neutralize the effect of reduced labor cost.
Co-shoring. (2010, 04 15). Retrieved 10 17, 2010, from Wikipedia: http://en. wikipedia. org/wiki/Co-
Ellis-Christensen, T. (2010, 09 09). What is nearshore outsourcing? Retrieved 10 17, 2010, from Wise
Geek: http://www. wisegeek. com/what-is-nearshore-outsourcing. htm
What does onshoring,offshoring,nearshoring mean? (2010, 10 17). Retrieved 10 17, 2010, from
Management Trainee: http://www. managementtrainee. co. uk/what-does-onshoring-offshoring-nearshoring-mean. html