I have been getting a lot of information on offshore outsourcing and would like to know more about the overall effects on the countries concerned. On the one hand, it looks quite beneficial in terms of economics, yet I have heard about drawbacks as well. What are the advantages and disadvantages of offshore outsourcing for the country that is outsourcing the services and for the country providing the services?
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What are the pros and cons of offshore outsourcing for the countries involved?
What are the pros and cons of offshore outsourcing for the countries involved?
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One advantage to offshore outsourcing in Information Technology is the creation of a highly skilled offshore workforce that becomes sustainable in the emerging markets. Such countries can evolve more along the value chain and provide better and higher value services.
Offshore it outsourcing has benefits and drawbacks on both sides of the client and services provider country.
Economic benefit: Demand side customers can access cheaper labour factors which are key to operational costs of product development and production.
Development of new markets: The countries that offer services obtain new funds for investments that would help in nurturing the IT industry and employment.
Leakage of intellectual property: For client companies, it can also be a concern of technology and data leakage.
Uneven distribution of benefits: This method results in economic dependency on outsourcing in supplier countries where labour market becomes instable and wages in other sectors tend to be reduced.
Therefore, although implementing the principle of outsourcing information technology can produce positive economic effects, one should not underestimate the potential drawbacks and adverse outcomes for both the buyer and the provider.