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Offshoring vs. onshoring

Dear Valérie,

My company is considering outsourcing some of our IT tasks to either the Philippines or India, and I would like your thoughts on the validity of offshoring those jobs. I have heard lots of conflicting opinions with regard to efficiency, communication and time management, and I am wondering if our company should truly go down that road. I read that some multinationals are in fact busy bringing those jobs back, but I’m not fully sure why this is happening. Your thoughts, please.

Eric B., Portland, OR


Dear Eric,

You are absolutely right. Large multinationals like General Electric and Nike have started a new trend, called “onshoring,” which focuses on bringing back the jobs, such as manufacturing, IT, customer service, etc. to each region where the goods or services are marketed/consumed/offered. This is part of a trend that realizes that each market is indeed local and that manufacturing in China to consume in the United States is not as affordable, convenient, or efficient as we originally thought. Also, the growing middle class of the big emerging markets are giving incentives to companies to produce and market locally, using their well-known brand to create specific products that fit the exact needs of each market.

As to taking IT jobs to the Philippines or India, my recommendation is to take a close look at the type of skills your company is planning on contracting offshore. This is to ensure that the skills and the U.S. managerial expectations that go with them will be suitable to the culture to which you will transfer them. Quality control, for example, is best handled in North America, Europe or Japan. Customer service, as it relies on specific expressions and the ability to understand people’s accents, is also more efficient when handled domestically. Other tasks can be delegated to other countries, but my advice is to not do so based solely on the premise of cost reduction due to the availability of a more affordable workforce.

The main reason companies should look at hiring people in foreign markets nowadays is to create a presence in that market and develop its brand. Using that foothold to better understand the needs of the market will offer advantages long-term that many companies should without a doubt consider. The mindset is thus quite different today than it was 20 years ago: Today we develop a global presence to take advantage of brand recognition in those markets instead of hiring abroad to reduce cost.

Hope this helps!

Valérie

Do you have a question for Going Global? Email Valerie@vbjusa.com. Please note that the Vancouver Business Journal and Valerie Berset-Price reserve the right to publish your letter or an edited version in all print and electronic media.

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