You must have heard of outsourcing, it is when a company hires another to perform certain functions for it. It is an external recruitment. Off shoring is the type of outsourcing where the company outsources its functions to be done in another country. This has a lot of benefits for the company yet some drawbacks too, like everything else it has its own pros and cons.
Off shoring can be beneficial to the firm for several different reasons. The first and the most basic one is that the firm won’t have to hire new staff from another country or send employees from the base country, it can be very costly and ineffective as they don’t have experience in that market, it will also free their current labor from the extra burden of managing across the border and thus make them more useful elsewhere. Another benefit of off shoring would be that the company you outsource your functions to in another country would have better knowledge of the local market situations there and would therefore be more efficient in running your operations. Off shoring will eliminate the costs of recruitment as well as the legal issues that might arise with it. The off shored company may even be more loyal to the original firm if it considers it to be prestigious working for them especially from developing countries.
Now with all these benefits there automatically are drawbacks too which need to be considered. The cost saving the company hopes for may not happen after all, the staff of the other country may not be adept for performing the functions it needs to efficiently causing the home base to control most of the operations anyway which will offset the cost advantages. There might even be cultural issues which may make the communication and effectiveness of tasks fall a whole notch, the quality of service may not be what the firm expected. There can also be data security issues.
So when deciding to offshore the business needs to weigh both the pros and cons.