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Going global:
OFF-SHORING AND OUTSOURCING
Introduction to subject
R
ead
the text and be ready to answer the questions that follow.
The process of economic globalization is also the process of global industrial restructuring. In order to adapt to increasing international competition, enterprises not only introduce more flexibility in their internal operations: they also change their relationships with domestic and foreign enterprises. It’s globalisation’s next phase – and one of the biggest trends reshaping the global economy. The process started with the transfer of manufacturing jobs. After that, simple service work, like processing credit card receipts, and digital labour, like writing software code, began fleeing high-cost countries.
Economists and experts are not unanimous about the meanings of the two terms: off-shoring and outsourcing. Sometimes these are used interchangeably. Some specialists believe that off-shoring is just an overseas component of outsourcing. Others consider that off-shoring and outsourcing are not the same things. Off-shoring means relocating processes or production to a lower-cost, foreign location in the form of subsidiaries or affiliates. There is nothing new about this in-house version of off-shoring. Large companies have had manufacturing subsidiaries outside their home countries for decades.
Many enterprises try to concentrate on core activities. Since companies cannot excel in every phase of production they subcontract non-core business functions to outside suppliers. When a company outsources the supply of products, services or their component parts, it delegates them to a third party provider - whether abroad or at home. Business process outsourcing is a more specialised form of outsourcing in which an entire business process, such as accounting, procurement or human resources, is handed to a third party. There is nothing new about it either. Companies have been buying outside services, from window cleaning to accounting, since business began. The outsourcing of inputs or services can take place either nationally or internationally. Recent developments indicate that large manufacturers are now implementing these network strategies on a global scale, relying on selected subcontractors to supply particular components for their worldwide operations. Foreign outsourcing allows companies to reduce operating costs, remain cost-competitive in their global markets and shift resources toward more competitive and higher value-added goods and services.
What
is relatively new is moving parts of the business to China, India and
other rapidly developing emerging countries. Here, companies face the
immediate question of whether they should set up their own
subsidiaries in these countries or contract them out to a local
operation.
Now, all kinds of knowledge work can be done almost anywhere. The driving forces are digitalization, the internet, and high-speed data networks that circle the globe. By mining databases over the internet, offshore staff can check individuals’ credit records, analyse corporate financial information, and search through oceans of economic statistics.
The trend is expected to keep service prices in check, just as it did when manufacturing went offshore. Companies will be able to reduce overheads and improve efficiency. By encouraging economic development in nations such as India, meanwhile companies in developed economies will have expanded foreign markets for their goods and services.
Outsourcing experts say the big job migration has only just begun. Frances Karamozis, research director at Gartner Inc., expects 40% of the USA’s top 1,000 companies to have an overseas pilot project under way within two years. The really big offshore push won’t be until 2010 or so, she predicts. But if big layoffs result at home, corporations and the government will face a backlash. Some states in the USA are already pushing for legislation to stop public jobs from being transferred overseas and now the unions are moving into the fight to keep jobs at home.
The truth is, the rise of the global knowledge industry is so recent that most economies haven’t begun to understand the implications.
For developing nations, the big beneficiaries will be those offering the speediest and cheapest telecom links, investor-friendly policies, and ample college graduates. In the West, it’s far less clear who will be the big winners and losers. But it will be soon found out.
What is the economic essence of off-shoring and outsourcing?
What are the usual rationales for off-shoring/outsourcing business functions and processes?
What types of work are generally shifted overseas?
What are the main factors affecting the choice of location?
What are the two phases of global outsourcing process?
What are the possible risks of going offshore?
What are the possible benefits for host countries?
ACTIVE VOCABULARY
to adapt – адаптировать, приспосабливать, переделывать
flexibility – гибкость, маневренность, приспособляемость
flexible – гибкий, подвижный, пластичный, хорошо приспособляемый
to flee – убегать, исчезать, перемещаться
core activity – основное, главное (по доходности) направление деятельности компании/ профильное предприятие ( ant. non-core business function)
input – производственный ресурс, фактор производства
a subsidiary – дочерняя компания
an affiliate - филиал
outsourcing – аутсорсинг - выполнение отдельных функций [производственных, управленческих, сервисных, информационных, финансовых и пр.] внешней организацией, располагающей необходимыми для этого ресурсами, на контрактной основе, ИЛИ Передача выполнения работ или оказания услуг внешнему исполнителю/подрядчику. Согласно ГК РФ: контракт подряда.
to outsource
to subcontract – отдавать выполнение определенной работы в подряд на договорной основе
syn. to contract out
subcontractor – подрядчик
off-shoring – перемещение деятельности за рубеж; зарубежный аутсорсинг: передача или выполнение работ внешними зарубежными подрядчиками.
to go offshore
9. accounting – бухгалтерский учет
10. procurement – закупки, снабжение, поставки
11. operating costs – операционные расходы (связанные с основной деятельностью); эксплуатационные затраты
to shift – перемещать, переносить, переводить, менять
shift – сдвиг, изменение, перемещение
value-added goods – товары с высокой степенью обработки; готовая продукция
overheads – накладные расходы
layoff – временное увольнение, увольнение из-за отсутствия работы, приостановка производства
efficiency – эффективность, производительность, рентабельность
to benefit – получать выгоду, пользу; выигрывать
benefit – выгода, польза, выигрыш
beneficiary - выгодополучатель
Suggest the Russian for the following word combinations.
Foreign outsourcing/off-shoring, global industrial restructuring, to adapt to increasing international competition, domestic and foreign enterprises, transfer of manufacturing jobs, to set up a manufacturing subsidiary, to concentrate on core activities, to subcontract non-core business functions to outside suppliers, to rely on subcontractors, to supply components, subcontracting network, to implement network strategies on a global scale, to reduce operating costs, to remain cost competitive in global markets, to shift resources, to flee high-cost countries, to keep service prices in check, to reduce overheads, to improve efficiency, to encourage economic development, job migration, investor-friendly policies.
Suggest the English for the following word combinations.
Отечественные и зарубежные предприятия, сократить операционные и накладные расходы, сосредоточить свою деятельность на профильных операциях, передать выполнение непрофильных функций зарубежным подрядчикам в странах с низкими издержками на заработную плату, повысить производительность труда, поставлять комплектующие, стимулировать экономический рост, перемещение производственных мощностей в страны с дешевой рабочей силой, сеть поставщиков, товары с высокой степенью обработки, благоприятный инвестиционный климат, сохранять конкурентоспособность, создавать зарубежные филиалы и дочерние компании, сдерживать рост цен на услуги.
L
isten
to a business studies lecturer talking about history of outsourcing
in the United States.
(http://www.britishcouncil.org/professionals-podcast-english-listening-downloads-archive.htm)