Offshoring

from Wikipedia, the free encyclopedia

The English term offshoring - German foreign relocation - describes a form of relocation of corporate functions and processes abroad. The triggers for an offshoring decision are usually the more favorable framework conditions abroad, especially with regard to labor costs or taxes . The term has received a negative interpretation in Europe, particularly due to the problem of job relocations to Eastern European and Asian countries.

In the computing industry, the term is often used in connection with the location of servers or services. The decision in favor of this relocation is usually based on a certain legal situation or state policy that favors one's own project.

The term offshoring can be defined differently to distinguish it from the terms outsourcing , nearshoring , onshoring and reshoring.

Offshoring vs. Outsourcing

Offshoring describes the geographical relocation of corporate functions, while outsourcing describes the organizational relocation. There is no compelling factual connection between offshoring and outsourcing. The relocation of corporate functions abroad can take place within a company (so-called internal or captive offshoring) or the functions can be outsourced to an independent company abroad (so-called offshore outsourcing). In addition to these two forms of pure offshoring, there is a range of intermediate forms such as joint ventures with local partners abroad.

Farshoring vs. Nearshoring

Often there is also an additional geographical limitation of the term offshoring; as Farshoring only relocation to distant lands are restrictive (from Europe mainly seen countries in America or Asia) understood. This must be distinguished from nearshoring , the relocation of tasks and functions to nearby countries. Nearshoring is often seen in Europe as a sensible alternative to farshoring. From the point of view of the German-speaking countries, the countries of the EU eastward expansion are particularly suitable. Small cultural differences, the geographical proximity and the minimal time difference are just some of the advantages of these countries.

Offshoring vs. Onshoring

Under Onshoring refers to the outsourcing of production or services within the country of origin of the client. Offshoring always refers to foreign countries. As an example of onshoring, consider a car factory that purchases doors from another company located in the same city. The proximity is an advantage.

Motives for offshoring

The motives for offshoring can be roughly divided into business, political-legal, technical-logistical and tax motives . In detail here come z. B. Consider:

  • business motives
    • Development of new sales markets
    • Development of new procurement markets
    • Development of local know-how
    • Limited domestic growth opportunities
    • Lower labor costs
  • political and legal motives
    • Trade barriers abroad
    • Local content clauses
    • Higher export costs
    • Lower environmental standards
    • Lower labor rights, lower standards of occupational safety
    • Shorter / easier approval procedures
    • Infrastructure aids
  • technical-logistical motives
    • Shorter sales channels
    • Shorter procurement routes
    • lower transport costs
    • Difficult to transport
  • tax motives
    • Lower effective corporate rate
    • Less extensive tax base
    • Subsidies
    • Special depreciation
    • Special economic zones
    • Tax relief for foreign companies / certain industries / legal forms

Industries and target countries

In addition to multinational corporations and large companies, medium-sized companies are increasingly doing offshoring. The scope of the outsourced activities ranges from individual sub-functions to complete departments and operating locations. The locations are often in emerging countries with comparatively low wages (also known as low-wage countries ). German companies mainly outsource to Eastern Europe and Asia; Outsourcing to other EU countries is also not insignificant.

In the area of software development, transport costs are extremely low and results can be sent over the Internet in a very short time. In this area, programming and maintenance activities, but also program and system design, are being relocated abroad.

A frequently cited example of offshoring is the outsourcing of IT application development to India , where numerous IT service providers (e.g. Covansys, Infosys , Wipro Technologies , Tata Consultancy Services (TCS), NIIT ), especially in the metropolis of Bangalore Technologies ), but also subsidiaries of US (including IBM and Microsoft ) and European companies (including SAP and Siemens ) are located. The People's Republic of China is also increasingly making its mark as an offshoring country. In the meantime, the providers of IT services are also starting to set up their own branches in high-wage countries in order to acquire orders that are then carried out in their home countries. In the meantime, specialized service providers have trained in Germany to take on offshoring for the manufacturing industry, e. B. ALTHOM.

Starting countries and importance of offshoring

Compared with the USA and Great Britain, offshoring in Germany has so far been relatively weak, which is not least due to the language and cultural barriers: since English is one of the official languages ​​in India, there are advantages here for the acquisition of orders from Anglo-American countries.

Based on studies, the McKinsey Global Institute estimates that around 1.5 million service jobs migrated from developed countries in 2003. This number is expected to increase to 4.1 million by 2008. To put these numbers in context, it should be noted that in America alone, over 4 million people change jobs every month. In addition, studies by the OECD, in which exports of services are used as the basis for estimates, show that three of the top ten countries belong to today's EU. This is to show that there are also strong tendencies in Europe to operate offshoring within Europe. Nevertheless, according to estimates by the OECD, up to 20 percent of jobs in the 15 EU countries before expansion, in the USA, Canada and Australia could be lost to offshoring.

Evaluation of offshoring

From an economic point of view, among other things, labor cost savings, access to qualified specialists and the use of time differences are understood as advantages of offshoring. At the same time, offshoring also creates new costs and risks: increased administration and communication costs, intercultural misunderstandings, infrastructural deficits and many other factors can reduce or even overcompensate for the advantages of offshoring, depending on the type of corporate function being relocated. Pay particular attention to the controlling of the supplier company. In the past, the economic evaluation of an offshoring project was often worked out with external consultants (sourcing advisors), but now there are online tools for simulating the profitability

When working with Indian IT service providers, those familiar with the subject refer to the following frequently encountered problems: significantly longer lead times, lack of adherence to deadlines and quality of work, high need for explanation when assigning tasks, high staff turnover, lack of project managers, delayed notification of the client in the event of problems and not commitments kept. Conversely, Indian IT service providers often criticize their overseas clients for imprecise or ambiguous work specifications.

Due to the direct impact on jobs, offshoring is also a hot topic at the political level. Critics, especially globalization critics and trade unions, fear that offshoring will result in the loss of many jobs in Europe and ruinous competition among states. In worst-case scenarios, they predict social conditions such as those that prevailed in Central Europe during the first phase of industrialization . Naomi Klein continues in her book “ No Logo! “Critically deal with outsourcing. She explains how large US clothing manufacturers such as The GAP , Nike , Levi's or Esprit are relocating production facilities to low-wage countries, referring to the simple working conditions by European standards.

This criticism is countered by the fact that the outsourcing of activities to cheaper providers strengthens the competitiveness of local companies and at the same time secures domestic jobs. Mixed calculation should make it possible to offer products and services at internationally competitive prices. With the increasing prosperity of the offshoring countries, it is expected that they will import more goods from the industrialized countries. The fact that Germany only benefits less than average from offshoring is regularly blamed on the heavily regulated labor market in Germany: the migration of some jobs cannot be prevented, and in some cases entire industries will disappear.

literature

  • Diana Farrell, Martha Laboissiere, Fusayo Umezawa, Sascha Sturz, Robert Pascal, Jaeson Rosenfeld, Charles de Segundo: The Emerging Global Labor Market. McKinsey Global Institute, 2005.
  • Stephan Manning, Silvia Massini, Arie Y. Lewin: A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent. In: Academy of Management Perspectives. Volume 22, Number 3, October 2008, pp. 35-54. (papers.ssrn.com)
  • Georg Erber, Aida Sayed-Ahmed: Offshore Outsourcing - A Global Shift in the Present IT Industry. In: Intereconomics . Volume 40, Number 2, March 2005, pp. 100-112. (springerlink.com)
  • Catherine Mann: Accelerating the Globalization of America: The Role for Information Technology. Institute for International Economics, Washington DC 2006, ISBN 0-88132-390-X . (bookstore.iie.com)
  • E. Carmel, P. Tija: "Offshoring Information Technology" - Sourcing and Outsourcing to a Global Workforce. Cambridge University Press, 2005.
  • E. Ruiz Ben, M. Wieandt: Growing East: Nearshoring and the new ICT labor markets in Europe. In: FIfF Ko. 3, August 2006, pp. 36-42 2006.
  • Johannes C. Kerner: Success factors in international outsourcing project management. Conceptualization - operationalization - measurement . Hamburg 2009, ISBN 978-3-8300-4399-7 .
  • Markus K. Westner: IT Offshoring: Essays on Project Suitability and Success . Wiesbaden 2009, ISBN 978-3-8349-2046-1 .
  • Expert group of the German Bishops' Conference: Relocation of jobs. Development opportunities and human dignity. Social ethical considerations . Bonn 2009, ISBN 3-940137-10-3 .

See also

Web links

Individual evidence

  1. ↑ Christoph Lüder, Hannes Fuchs: IT buzz words in comparison - outsourcing, offshoring and managed services: What are the differences? In: Manage IT . July 8, 2008, accessed May 20, 2017 .
  2. ↑ European Commission : Computers as well as electronic and optical products - Comprehensive sector analysis of the new skills and economic activities within the European Union - Summary , 2009, p. 8. (PDF; 1.2 MB)
  3. ↑ AFI-IPL Employment Promotion Institute : Employment crises in South Tyrol 2000–2006 - Statistical data and a case study ( memento of the original from July 14, 2014 in the Internet Archive ) Info: The archive link was automatically inserted and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. , 2008, p. 7, (PDF; 471 kB) @1@ 2Template: Webachiv / IABot / www.afi-ipl.org
  4. ↑ innovation report: German industry relocates abroad , August 16, 2004.
  5. ↑ Ch. Jahns, E. Hartmann, L. Bals: Offshoring: Analysis of the background and potential. In: D. Specht (Ed.): Insourcing, Outsourcing, Offshoring: Proceedings of the autumn conference 2005 of the scientific commission for production management in the VHB. DUV, Wiesbaden, 2007, pp. 85-106.
  6. ↑ Federal Statistical Office / STATMagazin ( Memento from November 15, 2010 in the Internet Archive ) Engagement of German companies abroad ( Memento from November 15, 2010 in the Internet Archive )
  7. ↑ Matthias Bottel, Eltje Gajewski, Christoph Potempa, Melike Şahinol, Ingo Schulz-Schaeffer: Offshoring and outsourcing of work activities, especially teleworking and software development activities. A literature review , Technical University Technology Studies Working Papers TUTS-WP-1-2016, Technische Universität Berlin. Sections 5.1 and 5.2, pp. 45–54.
  8. ^ Johannes C. Kerner: Success factors of international outsourcing project management. Hamburg 2009.
  9. ↑ subs.emis.de
  10. ↑ plixos.com
  11. ↑ J. Hirzel, B. Johann, M. Kietzmann, A. Kusitzky, J. Schönstein: The fairy tale of the miracle Indian. In: Focus . No. 5/2010, February 1, 2010, pp. 120-122.