The true essence of offshore outsourcing is just very simple. When a company hires another company to perform business functions in a country other than where the products or services are being developed or manufactured, then that is offshore outsourcing. Since most of the work is being done outside, this makes the labor force of established countries such as the US and the UK highly vulnerable. This issue has been the discussion of a lot of debates and conferences, but still offshore outsourcing dominates the industry as it presents a lot of advantages in terms of cost and benefits.
Some of the work that is being outsourced to countries such as the Philippines, India and China include customer support, computer programming, and data entry. There are even some companies that acquire the services of third-party companies to do critical business functions such as payroll, accounting, and human resource services. These functions were further categorized into four as the basic types of offshore outsourcing. These are:
(a) ITO or Information Technology Outsourcing all about IT services,
(b) BPO or Business Process Outsourcing call center management, insurance processing claims etc.,
(c) Software R & D software development done offshore and
(d) KPO or Knowledge Process Outsourcing higher skill sets such as reading X-rays, handling accounting functions, performing investment researches etc.
As mentioned, the driving force that makes offshore outsourcing the newest trend in doing business is always due to low costs. If work is easy to set up, repeatable, has high information content and can be transmitted over the internet, then the company is more than ready to resort to offshore outsourcing.