Normal Outsourcing is contracting out overall internal operations to a third-party. The basic agenda behind outsourcing is to move transactional activities (necessary for the development of products and services) to the experts outside the organization, in order to enable the organization to focus on its core competencies
Many companies 'spun off' their functions and sort greater specialization on the areas which earn them ‘the most profit’. However, if on one hand, a company manages to reduce cost profile, on the other hand, it also loses its own power on the operations.
Unlike outsourcing, offshoring acts more in the favor of the client and proves to be cost-effective. Offshoring is primarily a geographic activity. Offshoring is an extension of your local team but in a foreign country. Expensive labor, products and property or resource scarcity can be the driving force behind offshoring.
Under offshoring, clients will set up their own teams under the company and the Offshore company will help them by hiring people on service provider's payroll and also provide them with resources to execute the project such as office, laptops, internet, and compliances, etc. The actual amount will be charged for all the services and resources.
This is where Offshoring takes over Outsourcing. As in outsourcing, the company will hand over the entire operation to a third party. Not only this will cost them to lose their rights to operate on the project but this will also cost them higher . While under offshoring the client will retain hold over the project through his extended team and this will also prove cost-effective to him as it will cost at-least 50% lesser than outsourcing the same,
We can say that Offshoring is the principle of attaining greater total revenue by specialization and trade than outsourcing.
Practice of Offshoring in Informational Technology:
Offshoring is also the most demanding practice in the Information Technology sector. The software companies adopt offshoring outsource processes due to the ongoing shortage of IT professionals. The small to medium-scale ICT companies face difficulties in finding skilled yet affordable developers.
Therefore, these companies prefer to offshore their tasks to the countries where there is a vast pool of skilled, affordable, and highly experienced developers.
Among these countries, the most in-demand country for offshoring is India. In fact, According to the National Association of Software and Services Companies (NASSCOM), India is the most preferred software development outsourcing destination globally.
Furthermore, India is the world’s second-largest exporter of software (after the U.S). The number of software companies, with ISO 9000 certification, registered under India more than any other country.
India provides the USA and other countries, the finest and cost-effective offshore service ranging from software development to technical support. Offshoring to India has benefitted many small to medium-scale ICT companies as well as the huge multinational companies in the USA.
There are many benefits of offshoring to India, which we are going to discuss in details below: