Off-shoring, offshore outsourcing, near-shoring, co-shoring and information security cost: A comparative study
Off-shoring, offshore
outsourcing, near-shoring, co-shoring and information security cost: A
comparative study.
Abstract
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.
Introduction
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.
References
Co-shoring. (2010, 04 15). Retrieved 10 17, 2010, from Wikipedia:
http://en. wikipedia. org/wiki/Co-
shoring
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
Comments