Outsourcing and Offshoring

The concepts of outsourcing and offshoring are not new, but these practices are growing at an extreme rate. Offshoring refers to the process by which companies undertake some activities at offshore locations instead of in their countries of origin. Outsourcing is the subcontracting or contracting out of activities to external organizations that had previously been performed within the firm and is a wholly different phenomenon. Often the two combine to create “offshore outsourcing.” Offshoring began with manufacturing operations. Globalization jump-started the extension of offshore outsourcing of services, including call centers, R&D,

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information services, and even legal work. American Express, GE, Sony, and Netflix have all used attorneys from Pangea3, a Mumbai-based legal firm, to review documents and draft contracts. These companies benefit from the lower costs and higher efficiency that companies like Pangea3 can provide compared to domestic legal firms. This is a risky venture, as legal practices are not the same across countries, and the documents may be too sensitive to rely on assembly-line lawyers. It also raises the question as to whether or not there are limitations to offshore outsourcing. Many companies, including Deutsche Bank, spread offshore outsourcing opportunities across multiple countries such as India and Russia for economic or political reasons. The advantages, concerns, and issues with offshoring span a variety of subjects. Throughout the text we will revisit the idea of offshore outsourcing as it is relevant.

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