Investigations of the risks and challenges with offshore outsourcing - Research Paper Example

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Risks and Challenges Faced by Developed Countries When Outsourcing their IT Some firms in developed countries have adopted offshore business model to help them cut costs of production through reduced wage expenses. Offshore outsourcing has enabled them reduced their domestic investment and high-waged employment…
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Investigations of the risks and challenges with offshore outsourcing
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Download file to see previous pages IT companies outsource their programming process. Despite being cost-effective, developed countries faces some risks and challenges outsourcing their IT. These also include hidden costs incurred during the outsourcing process. These factors have hindered the attainment of the desired wage rate savings. At times, companies adopt this labour arbitrage play with little or no regard of the risks, challenges or hidden costs involved leading to later regrets. These include distance, vendor selection, confidentiality, chain management, reduced wage gap, competition, compliance risks among others. India has benefited most from IT offshoring due to its technically proficient manpower and large pool of English speaking people. Risks and challenges Challenges of distance and transition According to Gonzalez et al (2010), great distance poses a challenge in vendor selection. This force IT companies in developed countries to rely on consultants in the foreign country hence making the initial process expensive. The long distance between the country of origin and the vendor leads to high travelling expenses. This is because the company management needs to make regular direct monitoring of the business process in the foreign country to ensure smooth operation and maintenance of quality standards. This leads to additional costs that threaten to wipe the anticipated savings. During the offshore outsourcing, transition has been found to be an expensive part of the business. Companies have to restructure their delivery pyramids in order to overcome the operational complications of offshore outsourcing. The need for restructuring gets some companies off guard. This leads to significant increase in project costs in ways that were not expected (Doh 2005). The importation of workers with foreign knowledge is necessary during the transition phase. These workers are usually imported from the mother country of the company making the offshore outsourcing. The imported workers are required to learn how applications work, create required documentation and query offshore staff. They smooth up the requirements process and reduce rework. Some of them are brought in as business analysts or project managers. However, this is not sustainable for long if at all the company has to cut down on labour costs. In some cases, the imported staff experience language and cultural barriers during their offshore business relationship. Communication difficulty makes it challenging for them to work with staff in the vendor country. This means that the workers of the vendor country may not be able to get all the directions they need for effective and quality operations (Herath and Kishore 2009). There have been concerns from some of the consumers concerning the technical support and levels customer care offered oversees workers due to language barrier. A serious damage to technical support and quality of customer care affects the market. Customers may loose confidence in the quality of products being offered to them. When the challenge of distance is compounded with language and cultural barriers, it makes it difficult for the onshore and offshore teams to function as a coherent team. It also leads to reduced effectiveness in task assignments, project delays and missed requirements (Falk and Wolfmayr 2008). According to Raisinghani et al (2008), the cumulative result of the challenges of distance and, language and ...Download file to see next pagesRead More
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