Previously I wrote about the good and the bad sides of outsourcing. The ugly side of offshoring focuses on ideas that are generally neither good nor bad, but are more concepts that organizations should understand when considering offshoring.

Probably the biggest ugly side to offshoring is the current cultural differences between the U.S. and the offshoring countries.

According to a recent Business Week article, a study done by Accenture, a global management consulting and technology services company, “two-thirds of 200 U.S. business executives said that miscommunication arising from cultural differences has caused problems when outsourcing offshore. (http://www.businessweek.com/globalbiz/content/jul2006/gb20060717_515205.htm?chan=search)

“Different communication styles was identified as the key factor causing problems between onshore and offshore workers by over three-quarters (76%) of the managers questioned.

“Different approaches to completing tasks, different attitudes toward conflict and different decision-making styles were cited as the other main cultural factors that frequently cause upsets when managing an offshore outsourcing relationship.”

Another ugly side to offshoring is the eventual cultural, business and economic changes the host country is bound to incur and the ultimate impact this brings.

China has recently experienced this phenomenon as staff have become more knowledgeable in American manufacturing techniques (six sigma, lean manufacturing) resulting in increased labor rates and retention issues.

One solution was to move production inland. However, the ugly side of this becomes a less skilled workforce and increased transportation costs as a company moves away from seaports. Not to mention a shortage of management talent as expatriates don’t want to relocate inland. (http://www.economist.com/ business/displaystory.cfm?story_id=8515811).

In order to combat some of the bad and ugly issues, alternative ideas have been bandied about including rural sourcing, nearshoring and home shoring.

Rural sourcing, having work done in domestic locations where salaries and operating expenses are lower (such as the Midwest United States), has recently become more popular. (http://www.sourcingmag.com/offsite.asp?A= Fr&Url=http:// wired-vig.wired.com/news/business/

0,1367,69585,00.html?tw=rss.TOP)

Nearshoring is taking the outsourced work to a nearby country (such as Canada and Mexico, in the case of the United States) and is particularly popular for companies that don’t want to deal with the cultural, language or time zone differences involved in offshoring.

Finally, there is home shoring.

A recent Business Week cover story (January 23, 2006) on the future of offshoring includes a piece on home shoring: moving call center positions to the suburbs, rather than overseas, where “cyberagents” work from home. http://www.businessweek.com/magazine/content/06_04/b3968103.htm?chan=search

“The cyberagents love the flexibility and control (shifts can last as little as 15 minutes), and companies love that workers are paid only for the time spent on the phone, technology can monitor performance with precision, and overhead is about as low as it can get.”

So there seems to be a lot to consider when determining what will work best for any business operation.

And whether a company utilizes offshoring or one of the alternatives, it’s important not to jump on the bandwagon without first determining the good, bad and the ugly side of offshoring.

This entry was posted on Friday, January 26th, 2007 at 11:04 am and is filed under Organizational Change, Leadership. You can subscribe via RSS 2.0 feed to this post's comments. You can comment below, or link to this permanent URL from your own site. Your comments will appear immediately, but I reserve the right to delete innapropriate comments.