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The concept of offshoring brought with it a major change to the way the business operates. The concept which evolved due to the intense competition that erupted as a result of globalisation gives ample opportunity for the business entity to improve its profitability. Offshoring is defined as “the movement of a business process done at a company in one country to the same or another company in another, different country” -wikipedia. The transfer is generally made to low cost countries which enjoys the presence of highly talented people.

Certain business entities set up their own subsidiary in another country as the probability for the breach of confidential information pertaining to the company is less. These types of operations which are known as ‘captive’ operations help to retain the control within itself. But before setting up the unit in another country, the cost to the company must be analysed as in many cases, depending on the type of business, it will be advantageous for the company to transfer the work to another company. To ensure maximum payoff, the company should treat them as equal partners. Offshoring helps in canalizing the expertise to more profitable channels.

Selection of an offshore partner requires a detailed study of the company, its policies and goodwill, basic infrastructure available within the country, government stability and its policies, etc. India provides the services of an abundant supply of highly skilled English-speaking population at competitive rates. India had a flying start into this area of business when the world was facing the crisis of the Y2K problem. The success rate exhibited during this crisis induced many business undertakings to divert this expertise to other areas of the operation. With the support of a stable government which has emphasised the importance of infrastructure in its current Five Year Plan and a past history of good success rate on the work offshored to India, India can continue to fight for its market share in spite of the heavy competition from other countries.

Offshoring is not happily accepted by many as it is argued that the movement of work to another country leads to unemployment. There are also instances where the offshore company finally turns out to be a competitor to the parent company. With a low cost of production these companies enjoy the advantage of rendering their services at a price lower than the parent company. Data security is another major obstacle faced by these companies. It is with this intention that the companies sign a service level agreement with the confidentiality clause for ensuring the safety of its business.

Nearshoring is a new development which means the transfer of the processes to a country that is very near to the country of the parent company. Offshoring to a far away country has the disadvantage of spending huge sums of money on commuting as well as the strain of keeping the longer hours so as to communicate with each other. Nearshoring however has the merit of lesser travelling expenses and similar time zones.

Offshoring to a low cost country should be resorted only if it can be of gain to the company. A wrong move can have an adverse effect on the very existence of the company. 

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