Beware of Hidden Costs Lurking Behind Offshoring
It has been close to two decades since offshoring began to change the way global enterprises conduct their business. So be it application development or maintenance, call centers or supply chain development and management, IT enterprises, especially those in the United States, sought out offshoring as a means to save money and enhance profits for their various processes. Even as offshoring is seen as a major advantage by the developed countries, it does come with its own share of pitfalls. From challenges that include transfer and loss of control over core processes, there is many a hazard lurking amongst the benefits of offshoring. Hidden costs form a huge part of yet another challenge faced by offshoring IT enterprises. So while enterprises look towards outsourcing as a way to enhance their profit margins, not much is written about these costs.
Enterprises that opt for offshoring generally wish that their core processes be duplicated by their offshore service provider. However they need to consider the costs of hardware and software, which can definitely add up to an enormous sum when duties, taxes, etc., are accounted for. Enterprises interested in the advantages of outsourcing should also be aware that even in the case of an offshore vendor that has the required infrastructure it is the enterprise that will have to shell out money to use the service provider’s IT infrastructure services as well. Additionally, outsourcing involves building relationships with your offshore service providers and the workforce employed for your processes. This will involve a considerable amount of traveling, which further adds to the costs.
Offshoring to countries like India, Brazil and others also includes costs involved in adjusting to the service provider’s time zones and culture. This also requires some amount of financial investment. Errors in quality products can also add to the costs for the enterprise. So even as the allure of outsourcing to cheap labor overseas remains, the fact remains that an enterprise will not always get the quality end product it seeks. Domestic IT enterprises should therefore look at offshore vendors with care because such hidden costs could very well defeat the very purpose of offshoring.
Enterprises could perhaps give inshoring some thought instead of sending their core processes overseas. With benefits that includes a reduction in labor costs by 25%, especially in the midwestern U.S. states, reduced risk of any misuse of IP, zero effects from currency fluctuations, etc., inshoring can rival the benefits of offshoring easily. Not all enterprises may be aware of the hidden costs associated with offshoring, but it is time that they check out the option of inshoring and steer clear of the downsides of offshoring.
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