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Any developing business, regardless the field in which does it operate, is focused on the financial savings and the reduction of the summes of money spent on the evolution of the industry. That is wgu such thing as outsourcing is a highly widespreaded approach to the idea of the advancement of an enterprise. However, there are different strategies of outsourcing. Among them:
The main issue here is that the business making beginners do not really know all the nuances of each of possible approaches and especially if they are working on the field of cyber development and programming tend to make lots of various mistakes, which later may lead to different negative outcomes. Moreover, they are frequently do not fully understand what is the difference between outsourcing and offshoring. So, in that article I would like to give you several advices and tips on the issue of offshoring and outsourcing, while providing you with the most essential information about the main differences and features of each type of that popular techniques. Besides, I am willing to enlighten the topic of taxation offshoring and the main positive features of it.
While giving a onshore outsourcing definition, we can present it in a pretty clear manner. Nearshore outsourcing is one of the most widespreaded ways to rule the company. It means, that your compфny or even an affiliate is located within your home country without being transferred to the nearest state neighbours or overseas. The onshore outsourcing is actually not the most beneficial way of making business. For sure, as usually you can find different positive and negative features of that approach. However, before going in a closer look to these aspect I would also like to give a word on different types of onshore outsourcing, there are two of them. The first one is on-site outsourcing, which is usually used by small companies, which do not have enough financial support to move their related industry to another place. So, they decide to deal with all the issues on their own facility. Another type is offsite onshore outsourcing, which again could be separated on two other subclasses. First one is within your city. For instance in a less developed district, where it is easier to find people ready to work for lower wages. The second one is focused on the creation of additional firm in another less developed city, for instance in deep South or so-called Bible Belt, if we are considering the USA in that particular question.
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For now, let me give you a brief but pretty exhaustive explanation of the key positive and negative features of that technique. Firstly, while focusing on the most benefitial aspects let us start with such an important thing as culture. You may wonder why am I considering culture as one of the most primary features. It is quite important due to the fact, that it helps you to make the communication between you and the employees much easier. For instance, let us imagine, that you, while being a Canadian businessman would like to outsource your business to China. But, the Asian culture is highly different from the western one, with its own holidays, traditions and of course language, so management is a more complicated task. But if you would like to outsource your firm somewhere in St. John’s, for example, the communication and management will be much cheaper and easier. Moreover, money as always matter, and in case of onshore outsourcing you will spend much smaller amounts on such things and arrangements as management and travelling. Besides, you will also get an opportunity for a better quality oversighting. But not everything is so good. Lastly, you are obtaining a high level of economic and political security within your state and your industry situated within its borders.
As I have already managed in the beginning, outsourcing is usually focused on increasing productivity and smaller wage spendings. But in case of onshore outsourcing it is not really possible. For instance, if you are again willing to have an onshore in St. John’s your company is still a subject for strict workplace regulations, while people are not willing to work for the wages similar to those, existing in Asia and enforce themselves for night shifts and 24/7 working schedule. So, if you want to get higher productivity, while paying less money, onshoring is not the best decision. Moreover, you will lose money on real estate ranting with higher prices on it.
For now we are moving closer and closer to the overseas outsourcing, and here, I would like to give a nearshore definition and explain the key features of that strategy, while you will be able to see the difference between onshore and nearshore strategies used by businessmen. The very first change is that nearshore tactic is focused on the transition of a part of your company to the neighbouring country, for instance Canada, Mexico or USA, depending on the fact where the company was located from the beginning. For instance, you have a pretty good IT firm in Montreal, but you are willing to discover new horizonts and decide to arrange a nearshore outsourcing in Los-Angeles in order to find more partners, clients and become already an almost international organisation. In that case you may face much more positive features, than in the first situation. So, I would be grateful to give a word on the main features of nearshoring.
First of all, you are still facing pretty low traveling cost and the absence of problems with the transfer of essential documents and information from one place to another due to the fact, that your companies are located pretty close to each other. Secondly, in a neighbouring regions you are usually facing a related cultural patterns, what makes communication pretty easy and comfortable. Moreover, in case of nearshore industry you are able to to save up to 30% on wages paid to the workers, especially if we are considering the Latin American region as the key aim.
However, we again face several problems. First of all we do not have to forget, that your real estate saving may not satisfy your expectations because of the fact, that usually foreigners pay more for each square meter, than natives. Secondly, you have to be ready to a lower level of security, especially in Mexico, Panama or Guatemala because of the rapidly changing and fluctuating economy and as a consequence not really stable exchange rate. As well as in the first example you may not always able to extend the productivity by those numbers you want. And, regardless the fact, that I have just admitted, that neighboring countries can be culturally similar, do not always take it for granted. The best example could be maybe Poland and Hungary, which are actually neighbors, but with absolutely polar cultures. So, even by the usage of that approach you have to be aware of cultural and holiday differences.
Finally we are going to discuss the key feature of the most popular outsourcing strategy called offshoring. To define the offshore outsourcing it would be enough to say, that you are moving a part of your company somewhere to a remote region of the world in order to achieve your key goals. These goals could be separated on two main types. First one, as I have already highlighted, obtain better results, paying lower wages or to avoid taxation. So, now, it may be obvious for you that offshore and onshore outsourcing are absolutely polar and have almost nothing in common. While providing you with the key offshore outsourcing definition let me start with the type of it aimed on higher labour outcomes and give you the core positive and negative features of it.
First of all, offshore outsourcing give you an opportunity to get the best and highest results with paying a pretty low wage. For example, in India, Phillipines and China people are working on cyber development for a salary fluctuating between $10 to $50 per an hour of work, what gives you an awesome opportunity to save as much money as you actually want. Furthermore, in the highlighted states people can work 24/7, what means, that the number of produced products will rapidly skyrocket. Secondly, in that regions real estate is pretty cheap, what gives you an opportunity to pay smaller summers not only to the employees, but also to the real estate agents. Furthermore, because of high population in these countries it is much easier and comfortable to hire a skilled workers for the type of job you need.
However, there are also several drawbacks, which play an important role. One of the most essential is the cultural difference. For instance, it is quite obvious, that if you are a Western businessmen, Chinese or Indian traditions, holidays and day offs may be pretty unfamiliar for you. So, the best decision here will be to respect the people’s culture and give them an opportunity to work in a way they want, what will later help you to avoid arguments and misunderstandings. Moreover, regardless the fact that China, India, Brazil or Philippines are considered to be the rapidly developing economies there is also existing a threat of economic and political instability in the region, so, you must be ready to face any possible scenario. Because of it, nobody can guarantee a 100% level of security for your industry working out there. However, despite of all these minuses, offshoring is offering to many bargaining deals, what makes it a highly attractive opportunity for development and evolution.
While talking about the tax free offshores we have to remember, that that strategy is used frequently pretty good and big companies. For instance, South African diamond mining company De Beers has their numerous offshores in such states as the Netherlands, Singapore, Botswana and Bahamas, while Microsoft corporation is aimed om such regions as Luxembourg, Switzerland or Cayman Islands. So, while choosing a place for a tax free offshore you first of all have to understand, that you have at least something to hide and keep in mind, that it is a pretty big risk, due to the fact, that for example in Panama the international community is trying to deal with offshores in order to destroy corruption and bribery among the leading world politicians. Anyway, the best places for such operations are small states or dependent territories such as Bermudas, Singapore or Bahamas. All of them are arranging such an opportunity for businessman because of the one reason, to attract investments. For example in Bahamas because of the lack of the corporate income tax and withdrawing tax lots of companies such as JPMorgan Bank or Pfizer are outsourcing their offshores directly there. The same situation is in Bermuda or Cayman islands. But you have to keep in mind, that for now that decision is a pretty ricky choice, so, be careful.
Now, let us talk on an issue, which considered to be called the battle of Outsource VS. Offshore. It would be suitable to mention, that sometimes people do not even understand the difference between these two notions, so I would like to explain what is offshore outsourcing. Offshore outsourcing is a pretty broad notion, which usually among common people mean just the creation of a new company somewhere else, however, that is not true. Outsourcing in its clear sense is another thing. When you outsource a part of your company it almost equals the integration of a part of your industry to another with the signing a treaty. Simply saying, it is a transition of several duties of your company to another one but still under your jurisdiction, moreover the company companion has to be located in a place, where do you want to transfer a part of yours. So, we are facing a question, what is better, offshoring or offshore outsourcing. And here, I have to notice, that giving a simple and clear answer is a complicated task. The only thing I have to notice is that the second strategy is much safer and stable, due to the fact, that in amy case, if you have a companion or an allie in an unknown region, it is easier to deal with the problems, other things depend only on your own choice.
All in all, when we are talking about the outsourcing and the choice in the issue of onshore vs offshore, I would like to conclude, that that particular decision and the whole process is one of the most complicated in the whole world of business, especially for those, who are just making the very first confident steps in the field of business building. Anyway, I can exactly say, that offshoring is better, than onshoring, while all other decisions are going to be made by yourself. The only thing, that you have to remember here all the time is to be highly careful and precise, due to the fact, that because of the wrong choice may depend the whole future fate of your industry. I hope, that this article was useful for you and helped to enlighten the very basic positions of such a complicated process as business outsourcing.