Offshoring--The Ugly Truth

Offshoring—The Ugly Truth

In my last blog posting I introduced the idea that offshoring and outsourcing are in fact two different things. This is not a common notion. The more I read, the more I find that there is an ever so subtle difference. It seems as if offshoring is the placement of work overseas whereas outsourcing is contracting a domestically located duty elsewhere for the sake of lower cost. For who find the two synonymous, you are not alone. In fact, you share the same point of view as President Barack Obama.

On June 25, 2012, President Obama made a campaign speech in Massachusetts where he practically mocked Mitt Romney’s advising team for saying they are in fact different. Since Governor Romney is a businessman, President Obama felt it necessary to point out his ignorance (for a lack of better words) to assume that the two are different. Finally, Romney’s adviser, Eric Fehrnstrom clarified that outsourcing occurs all the time; it simply means that a vendor is upholding a certain set of duties, while “’offshoring is the shipment of American jobs overseas’” (Stein 2012). With that said, I am going to have to kindly disagree with the President.

Offshoring has its advantages, generally that of lower wages, lower cost of production, global expansion, and maybe global power if a business is mainstream enough. Through offshoring, many companies reach these goals, all morals and ethics aside. Nike is a popular one that most people have at least heard of. As a worldwide leader in athletic wear, Nike continues to maintain a huge profit margin despite all the human rights obstacles it encounters as well as the labor laws that it infringes upon. In this case, Nike seems invincible because of its stature—essentially it’s too powerful to destroy at this point. Not all businesses have this luxury, if you will. Authors Ravi Aron and Jitendra Singh write on the realities of offshoring and how those goals previously mentioned are not always reached, in fact, offshoring can get ugly sometimes.

      Once a company offshores elsewhere, yes it saves them money for a time being, but sometimes offshoring ends up being a temporary solution to an ongoing responsibility. If the working force of the country being offshored to is smart enough, they will catch on to the ways that they have learned from the “home” country of the business. Long story short, it is a gamble for big businesses. There is always a risk that the newly hired labor force will use those skills for their own benefit, eventually reaching the point of competition amongst the company they once worked for.

Additionally, companies that offshore to a “provider” as Aron and Singh would put it, use very simplified methods of analysis when deciding on such a venture. Some would call this a “cost-benefit analysis”. Rather than conducting in depth research about the culture, labor laws, and policies of the nation to foresee future implications of this decision, it seems that the research centers on the betterment of the company. Little do they know that the providers have the advantage once they are given an important enough responsibility. The authors continue to write that those providers can hold companies “ransom” by upholding outrageous demands and needs (Aron & Singh 2005). These kinds of repercussions do not cross one’s mind when saving money is on top of the agenda. In such cases businesses learn the hard way, but hopefully with more literature on past offshoring failures can prevent future companies from falling into the same pattern.

      In conclusion, I am not condoning nor condemning offshoring. I simply seek to inform readers on this trend by showing the good, bad, and the ugly in hopes of encouraging them to form their own opinion. In all honesty I still do not know where I stand on the issue. I am on the same journey as the rest of you guys. See you next Tuesday!

Works Cited

Aron, R., & Singh, J. V. (2005). Getting Offshoring Right. Harvard Business Review, 83(12), 135-143.

Stein, S. (2012, June 25). Obama mocks romney aides for outsourcing v. offshoring defense. The Huffington Post. Retrieved from http://www.huffingtonpost.com/2012/06/25/obama-outsourcing-offshoring-romney_n_1625287.html