Offshoring is a term that is often used in business and tossed around in political rings with particular fervor. While some are quite knowledgeable of the concept, still many others remain unknowing. What exactly does it mean to offshore and what are its implications? Read on for the scoop.
Concept and Motivation
Doing business from your home country certainly has countless advantages to the point that many would never even consider an alternative option. This is not the case though as many companies seek out foreign countries in which to physically base their entire businesses from. When a company does choose a foreign country for the headquarters of its operations, it has thus offshored its business.
When first learning of this business tactic, it is a common response from most to immediately want to understand why this would happen. With so many potential barriers to overcome in language, culture, ethics, a business relocation, currency, and so on, why would a business ever choose such an option? The motivation is simple and can almost always be reduced to a single motivation – finances.
In many cases, companies can stand to shake off incredible sums of debt incurred by operating domestically. Taxes on all aspects of business can become quite high in some localities. As well, domestic products used as crucial ingredients in a company’s manufacturing endeavors may be too pricey when purchased and consumed within the native country. In addition, employee pay rates and the costly, high quality work environs enforced by US policy can be avoided by moving operations elsewhere. In virtually all cases, financial benefit is so considerable that moving to another country simply becomes a smart business move.
A Brief History, Plenty of Controversy
To offshore a business was virtually unheard of in common business strategy leading up to the 1980’s. It was at this time that the first news of outsourcing work and offshoring businesses only began to emerge on rare occasion. As time progressed and government regulations expanded, motivations for the offshore move grew considerably. Now, such an event is common news material and political fodder.
The political interest of which we speak is a result of the masses of money at stake as well as the masses of controversy that have come to surround the offshore practice. In the North Carolina State University article, Ethics in Computing, the argument, conflicting views, and causes for domestic disdain for the subject are clear:
“Many people consider offshore outsourcing to be immoral and unethical on the part of the company. However, morality and ethics are difficult to judge when it comes to market outcomes. Offshore outsourcing has numerous consequences that can be considered both ethical and unethical, depending on the interpretation of the individual or company. While many unemployed IT professionals may be dismayed, studies show that outsourcing is improving the American economy. A major conflict for outsourcing comes not only from the replaced employees, but customers as well. As the amount of data that American companies trust to foreign countries continues to grow, more risks and conflicting interests come in to question.”
This is the tumultuous history of the act of moving business headquarters oversees. To offshore may bring some inherent controversy and mixed emotions, but it also offers abundant financial gain. Unchanged, this fact alone will continue to fuel offshoring tactics in business indefinitely into the future.
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