Difference Between Offshoring And Offshore Outsourcing Essay

The term offshoring and offshore outsourcing has frequently been misused synonymously in the present context. Despite from general public argument, several literatures around IS/ Information Technology research have mis-defined offshore outsourcing as merely the usage of service supplied by another company, whether it is owned by a third-party or non, outside the national boundary lines of the host company. ( Pries-Heje, Baskerville & A ; Hansen, 2005 ; Niederman, Kundu & A ; Salas, 2006 ) & A ; However, purely talking, there is a clear differentiation on the ownership of this foreign provider. Company that has an ownership interest in the foreign providers ( affiliated ) would non be considered as offshore outsourcing.

Definition from the United States Government Accountability Office ( GAO ) has good covered this component, it defined offshoring as company sourcing services across the boundary line by puting in a foreign affiliate while offshore outsourcing as company geting services outside the national boundary line from an outside ( unaffiliated ) company. Exhibit 1.1 demonstrates the difference between offshoring and offshore outsourcing. Hence, those services acquired by General Electric ( GE ) in India would be classified as offshore outsourcing while it would merely be classified as offshoring for Siemen as the former offshore development centres is owned and performed by a 3rd party, Tata Consultancy Services ( TCS ) but the latter one is owned and performed by Siemen itself.

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Section 2 – Request for command ‘s Description

Photo Decorator is an iPhone app that section for young person particularly adolescent misss. It allows users to adorn their exposures that taken from their iPhone with different sketch spines and different colourful text signifiers and portion with friends. This thought is come from the Nipponese Photo Sticker Booths, Purikura. Purikua is a sawed-off signifier of Purinto Kurabu, it means Print Club in English ( J. M. Williams ) . Since the mid 1990s, Purikura has become a brainsick young person civilization in Japan and has rapidly spread throughout states like Taiwan, South Korean and Hong Kong. Today, this civilization has begun to spread out into the smart phone apps ‘ market.

Below would be the full command description for Photo Decorator that posted on the VWorker site:

Since a figure of iPhone apps exists in the market are similar, we are looking for a new coder to help us and to assist plan cunning and more user friendly version of a exposure interior designer app which will allows users to adorn their ain exposures with a figure of cunning spines or casts, different colourful text signifiers and different manner of manus drawings. The full cute spines ‘ beginning would be provided, furthermore, some images captured from similar apps would be included below to give the coder an thought what our desire apps would be looked like, hence this occupation should non be excessively disputing for a seasoned coder. We would wish this app to work on the iPhone 4, and if possible, on the iPod Touch 4G every bit good. Our timeline for the completion of this app is flexible, with up to 14 yearss although we would prefer the work to be done within 5 – 7 yearss ( an excess 10 % of the agreed undertaking monetary value would be added as a fillip if the app is 100 % done within 5 – 7 yearss and with a satisfactory quality plus fiting all our demands ) .

Specifically, we are looking for is a coder to cut and glue all the cute casts ( up to 50 casts in entire ) provided by us into the apps. In add-on, design 2 cute text signifiers, 2 different ‘special and cute ‘ manus pulling pen coppices with each dwelling of 7 basic colourss to let users to finish the undermentioned maps below in a friendly manner:

Users can upload or choose images that want to be decorated by this app from their exposures albums in their iPhone 4 or iPod Touch 4G

Users can salvage the adorned exposures in their exposure albums in their iPhone 4 or iPod Touch 4G

Users can add different cunning spines or casts to the exposure

Users can add their ain text on the exposure

Users can manus pull on the exposure

Each spine, cast, text and manus drawing can be enlarged, shrunk, resized, rotate and freely movable.

Users can remake or undo any procedure

Section 3 – Hazards

3.1 Country Risk

State hazard, can besides be re-named as Geo-Political hazard, is defined as a group of hazard factors such as war, terrorist act, boundary line differences, regulative demand and political bureaucratism that may upset the continuity of the bringing from the service supplier. ( Aeh 1990 ; Smith et Al. 1996 ; Carmel 1999 ) It is a complete new issue and has rapidly become cognizant by corporate since 9/11 and the struggle of India-Pakistan Kashmiri. Today, it even turns into a norm for them, in peculiar for U.S. corporations, to take analysis on these hazards in the seller choice procedure for their offshore outsourcing undertakings. Stephanie Overby, CIO, tries to notice on that: Corporate in America late has changed their mantras on offshore outsourcing by shouting the undertakings to acquire done “ safer, more stable, more secure ” instead than “ better, faster and cheaper ” .

Surprisingly, based on a recent studies from The Brown-Wilson Group Inc. ‘s “ 2009: The Year of Outsourcing Dangerously ” , several current major locations for IT offshore outsourcing like Delhi, Bangalore & A ; Mumbai in India, Bangkok in Thailand, Dalian in China and Kuala Lumpur in Malaysia were ranked as the top 25 most unsafe metropoliss for offshore outsourcing. On top of that, India was given the name of the worst state for rising of geo-political issue. Recent terrorist onslaughts in Mumbai, India would be a good illustration demoing the unstable geo-political environment in India. Nevertheless, despite these bad ranking, India and China would likely still be the outsourcing locale for Photo Decorator, hence, it would be better for us to analysis in deepness on each of their geo-political hazards in below:

India: Political clime would be the biggest beginning of uncertainness for taking India as an outsourcing locale. There is a long history of ongoing tenseness and difference between India and Pakistan over Kashmir, in peculiar, the close war between the two sides in 2002. Presently, this relationship between the two sides still non chill down yet.

China: Similar to India, there is a long history of struggle among the control over its neighbour, Taiwan. Joel Plaut, VP Program Management of SendWordNow, remark “ Political tenseness between China and Taiwan is likely higher than is realize, due to miss of an existent recent military incident.

Schemes for turn toing state hazard chiefly related to multiple location diverseness. In kernel, it means ne’er seting all your eggs in one basket. It is strongly recommend that corporate, in the procedure of seller choice, should either taking a seller that have globally working site or dividing the full order into small pieces and puting them with sellers located in different states to cut down the state hazard.

3.2 Currency-Fluctuation Hazard

Currency hazard is defined as the hazard of exposure due to volatile exchange rates. It arises whenever the offshore outsourcing minutess involve 2 different currencies. In most of the instance, it would be USD to Indian rupee ( INR ) or Euro to INR, but in our instance, it would be GBP to USD. It is suggested that corporate must guarantee to take into history the effects of fluctuations on exchange rate as any unforeseen vacillation would increase cost and minimise economy. ( Kumar and Eickhoff, 2006 ) However, compared to a decennary ago, this issue was non every bit hot as now. It is an issue used to be mostly ignored by corporate who engage in the outsourcing activities. Mark Mayo, spouse and president of TPI Global Resources Management tried to notice on that “ Currency hazard has become much more of a focal point in the outsourcing industry than it has been in the past because of the fluctuation and volatility of the dollar. ”

To understand how the currency hazard between GBP to USD plays out in our instance, it would be better for us to see a homogenous offshore outsourcing contract as the contract of Photo Decorator but took topographic point in a different period:

Start Date: 13Dec 2010 Finish Date: 28Dec 2010

Entire Contract Value: USD $ 140 Payment Method: Pay-for-Deliverables

Under such scenario, we would be agreed to pay USD $ 140 at the terminal of 28Dec 2010 in exchange for the deliverables of Photo Decorator. In other words, based on the exchange rate between GBP/USD on the twenty-four hours we signed the contract, our entire cost would be tantamount to around GBP?88. Since we expected that what we paid in USD on the 13Dec would be the same on the 28Dec, we left our GBP on the tabular array. However, during these 2 hebdomads clip, the dollar did strengthen and moved against our place. By the terminal, on the 28Dec, the GBP/USD fell from 1.5858 to 1.5366 ( -3.10 % ) . Our entire cost has risen to around GBP?91 and therefore, we exposed to the currency hazard. Exhibit 2 shows the exchange rate motion from 13Dec to 28Dec.

Schemes for turn toing currency hazard chiefly related to currency fudging or adding a proviso in the contract. Currency hedge is a more familiar manner for corporate to pull off unforeseen swings in currency. It involves the usage of derivative instruments like options contract or foreign exchange forward contracts. On the other manus, the construct of adding a proviso in a contract is a new and instead advanced scheme. However, it is non normally used by corporate as it extremely depends on the willingness of the seller on come ining such understanding. It is fundamentally an thought of leting the outsourcing clients an chance to renegociate or end the contract when the exchange rate moves against their places.

3.3 Security Hazard

Security hazard, can besides be re-named as Intellectual Property ( IP ) Protection hazard, is a hazard tie ining with physical assets or rational belongingss that belongs to the outsourcing corporate which have being stolen or manipulated by their service suppliers. ( Smith et al. 1996 ; Carmel 1999 ) In most of the developed states such as U.S and U.K, it is a concern norm for companies to maintain on their client confidential information, nevertheless this does non use to others particularly to those developing states in Asia. During the past decennary, there were plentifulness of narratives affecting unethical companies in developing counties illicitly obtain informations from their clients and threatened for compensation or even marketed them. For illustration, In October 2003, University of California San Francisco Medical Center ( UCSF ) was threatened by an outsourcing translator in Pakistani on exposing its patients ‘ confidential medical records.

Based on a research in 2011 done by A T Kearney on the best outsourcing finish, Singapore and Canada remain the leader in concern environment in footings of protection on security of rational belongings. While several current major locations for low cost IT offshore outsourcing like India, Thailand and China are on the underside of the tabular array. Exhibit 3 shows the full tabular array from the study. Recent cyber choping incident on Google e-mail histories in China would be a good illustration demoing the job of informations security in China. However, despite these bad repute, India and China would likely still be the outsourcing locale for Photo Decorator, hence, it would be better for us to analysis in more item on each of their development on protecting rational belongings in below:

India: Protection on rational belongings in India is singular bettering. It is one of the most responsible members of World Trade Organization ( WTO ) and has been continue run intoing the WTO criterion on Torahs ‘ of rational belongings rights since 2005. Furthermore, National Institute for Intellectual Property Management ( NIIPM ) has been established in 2005 to execute preparation, policy advices and research on this country. Steve Ballmer, Chief Executive Officer of Microsoft Corp. said: India is non perfect but the rational belongings protection in India is far, far better than it would be in China.

China: Over the past decennary, China has signed a figure of international protocols related to the protection of rational belongings in international degree such as the Agreement on Trade-Related Aspects on Intellectual Property Rights. However, it is still frequently under knocking. Chris Devonshire-Ellis, a senior spouse of Dezan Shira & A ; Associates Business Consultants tried to notice: There are excessively many misconceptions or misinterpretations about the topic and how to get by with rational belongings when it comes to “ the China issue.

Schemes to extenuate this hazard chiefly related to scrutinizing. The thought is that corporate should verify their service suppliers ‘ security procedure before, during and even after the undertaking to guarantee all the private informations are secured.

3.4 Culture Difference Hazard

Culture difference hazard, can besides be re-named as Cross-cultural hazard, is a hazard derived from the differences in footings of national or corporate civilizations between the two sides which influence the offshore outsourcing relationship. ( Aeh 1990 ; Ramarapu et Al. 1997 ; Carmel 1999 ) Culture is a corporate phenomenon. It is learned from people who live about, non innate. ( Hofstede 2005 ) It consists of unwritten regulations of the societal game. One classical illustration would be Indian are ne’er comfy to state “ No ” . In India, people used to avoid giving negative responses. They tend to state “ Yes ” to everything particularly when reacting to their clients. Whatever tasks their clients inquire them to complete, they would reply with a “ Yes ” . However this “ Yes ” does non intend that they guarantee to finish all the undertakings for you. It does merely intend that they would seek their best to complete. Therefore, those people who believe on this “ Yes ” may be disappointed in the terminal or at a really late phase.

It is frequently the instance that the grades of civilization difference vary from topographic point to topographic point. Nearshoring suppliers tend to hold a much closer civilization with the client organisation. ( Kvedaraviciene 2009 ) However, since our undertaking, Photo Decorator, would likely be outsourced by suppliers in far east like India and China, hence, it would be better for us to analysis in more item on each of their civilization in below:

India: Apart from the “ Yes ” civilization, direction manner is besides different between India and Western states. In India, directors are required to follow up the undertakings often ; otherwise, employees may sort those undertakings as unimportant and detain the advancements. Beside this, another typical difference would be the right for subsidiaries to disrupt a conversation in a meeting. In India, sub-ordinates in a squad are non allowed to give their part or sentiments freely until their seniors inquire them to make so, otherwise, this would see as disrespectful to their senior.

China: Chinese civilization is hard for Westerners to follow. One typical difference would be negociating or bargaining in China is recommended between client and marketer as it is viewed as a portion of set uping a good relationship. They argue that “ money will come back, client may non ” . In other words, marketer would take to loss net income instead than a client.

Schemes for turn toing civilization difference hazard chiefly related to comprehension. The most ideal instance would be personally sing the offshoring location and sing how make these people communicate and work. However, if this is non the instance, corporate should instead seek advices from either specializers or any employee who has experiences with both of the civilizations.


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