Offshoring

, often occurs as a result of free trade policies between high-wage and low-wage countries. Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored. Offshoring neither implies nor precludes involving a different company to be responsible for a business process. Therefore, offshoring should not be confused with outsourcing which does imply one company relying on another. In practice, the concepts can be intertwined, i.e. offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing. In-house offshoring is when the offshored work is done by means of an internal (captive) delivery model. Imported services from subsidiaries or other closely related suppliers are included, whereas intermediate goods, such as partially completed cars or computers, may not be.

, often occurs as a result of free trade policies between high-wage and low-wage countries. Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state governments may also employ offshoring. More recently, technical and administrative services have been offshored. Offshoring neither implies nor precludes involving a different company to be responsible for a business process. Therefore, offshoring should not be confused with outsourcing which does imply one company relying on another. In practice, the concepts can be intertwined, i.e. offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing. In-house offshoring is when the offshored work is done by means of an internal (captive) delivery model. Imported services from subsidiaries or other closely related suppliers are included, whereas intermediate goods, such as partially completed cars or computers, may not be. === Nearshoring === Nearshoring is a form of offshoring in which the other country is relatively close such as one sharing a border. Being nearby results in potentially beneficial commonalities such as temporal (time zone), cultural, social, linguistic, economic, political, or historical linkages. According to the 1913 New York Times article "Near Source of Supplies the Best Policy", the main focus was then on "cost of production." Although transportation cost was addressed, they did not choose among: transporting supplies to place of production transporting finished goods to place(s) of sale cost and availability of labor The term nearshoring derives from offshoring. When combined with outsourcing, nearshore outsourcing, the nearshore workers are not employees of the company for which the work is performed. Nearshoring can involve business strategy to locate operations close to where product is sold. This is contrasted with using low-wage manufacturing operations in developing nations and shipping product back to the country that offshored the work. With nearshore outsourcing, the work is done by an outside company rather than internally, but in contrast to typical offshore outsourcing, the work is done in fairly close proximity to the company headquarters and its target market. Nearshoring is often used for information technology (IT) processes such as application development, maintenance and testing. In Europe, nearshore outsourcing relationships are between clients in larger European economies and various providers in smaller European nations. The attraction is lower-cost skilled labor forces, and a less stringent regulatory environment, but crucially they allow for more day to day physical oversight. These countries also have strong cultural ties to the major economic centers in Europe as they are part of EU. For example, as of 2020 Portugal is considered to be the most trending outsourcing destination as big companies like Mercedes, Google, Jaguar, Sky News, Natixis and BNP Paribas opening development centers in Lisbon and Porto, where labor costs are lower, talent comes from excellent Universities, there's availability of skills and the time zone is GMT (the same as London). US clients nearshore to countries such as Canada, Mexico and nations in Central and South America. ===IT-enabled services offshoring=== Growth of offshoring has been linked to the availability of reliable and affordable communication infrastructure following the telecommunication and internet expansion of the late 1990s. Much of the job movement was to outside companies, offshore outsourcing. ===Re-shoring=== Reshoring, also known as onshoring, backshoring, or inshoring, is the act of reversing an offshoring change—moving a business process that was offshored back to the original country. John Urry, professor of sociology at Lancaster University, argues that the concealment of income, the avoidance of taxation and eluding legislation relating to work, finance, pleasure, waste, energy and security may be becoming a serious concern for democratic governments and ordinary citizens who may be adversely affected by unregulated, offshore activities. Further, the rising costs of transportation could lead to production nearer the point of consumption becoming more economically viable, particularly as new technologies such as additive manufacturing mature. The World Bank's 2019 World Development Report on the future of work considers the potential for automation to drive companies to reshore production, reducing the role of labor in the process, and offers suggestions as to how governments can respond. A similar movement can be seen related to Robotic Process Automation, called RPA or RPAAI for self-guided RPA 2.0 based on artificial intelligence, where the incentive to move repetitive shared services work to lower cost countries is partially taken away by the progression of technology. Melanie Rojas et al. in a 2022 Deloitte's report commend adopting a combination of re-shoring and friendshoring - "working with other nations and trusted supply sources" - as a business practice and policy initiative aiming to promote supply chain resilience. Empirical studies of 2018–2023 relocations indicate that reshoring to the home country comprised a small minority of observed moves (about 16% of 244 decisions), revealing a gap between policy rhetoric and actual corporate behavior; diversification across multiple foreign locations was far more prevalent. ===Public opinion=== U.S. opinion polls indicate that between 76 and 95% of Americans surveyed agreed that "outsourcing of production and manufacturing work to foreign countries is a reason the U.S. economy is struggling and more people aren't being hired." ===Impact of the Internet=== Regardless of size, companies benefit from accessibility to labor resources across the world. This gave rise to business models such as Remote In-Sourcing that allow companies to tap into resources found abroad, without losing control over security of product quality. New categories of work such as call centres, computer programming, reading medical data such as X-rays and magnetic resonance imaging, medical transcription, income tax preparation, and title searching are being offshored. ===Ireland=== Before the 1990s, Ireland was one of the poorest countries in the EU. Because of Ireland's relatively low corporate tax rates, US companies began offshoring of software, electronic, and pharmaceutical intellectual property to Ireland for export. This helped create a high-tech "boom" which led to Ireland becoming one of the richest EU countries. ===NAFTA=== In 1994, the North American Free Trade Agreement (NAFTA) went into effect, and it increased the velocity of physical restructuring. The plan to create free trade areas (such as Free Trade Area of the Americas) has not yet been successful. In 2005, offshoring of skilled work, also referred to as knowledge work, dramatically increased from the US, which fed the growing worries about threats of job loss. ==See also== Anti-globalization movement Balance of trade Decline and Fall of the American Programmer Domestic sourcing Follow-the-sun Free trade controversy Friendshoring Global delivery model Global labor arbitrage Global sourcing Globality Globally integrated enterprise Guest worker Information technology consulting Labor shortage List of international trade topics List of countries by imports List of countries by net goods exports List of countries by service exports Low-cost country sourcing Offshore company Offshore custom software development Offshoring Research Network Programmers Guild Restructuring Runaway production Tax haven ==References== ==Further reading== Consulate General of the Kingdom of The Netherlands Guangzhou (2011). Outsourcing Comparison Study South-East Asia: China, India, Vietnam 2011-2012 . Alan S. Blinder, "Offshoring: The Next Industrial Revolution?" in Foreign Affairs, Vol. 85, No. 2 (March/April 2006), pp. 113–128. Thomas L. Friedman, The World is Flat: A Brief History of the Twenty-first Century (2005). Catherine L. Mann & Jacob Funk Kirkegaard, Accelerating the Globalization of America: The Role for Information Technology, Institute for International Economics, Washington D.C., Peterson Institute for International Economics (June 2006). Stephan Manning, Silvia Massini & Arie Y. Lewin, A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent, Academy of Management Perspectives, Vol. 22, No. 3 (October 2008), pp. 35–54. ==External links== An Atlas of Offshore Outsourcing by David E. Gumpert (BusinessWeek online)

Text derived from https://en.wikipedia.org/w/index.php?oldid=1378383075 under CC BY-SA 4.0; modifications have been made.