This memo discusses the offshoring case of the Global Information System (GIS). The main issues that rose due to offshoring have been mentioned in detail, moreover suggestive strategies and methods which would be helpful in handling this issue are discussed and their justification has also been provided.
Offshoring at Global Information Systems (GIS)
This memo discusses the offshoring issue at GIS which was suggested by the company’s vice president Jane Harding who had considered the option to offshore its employees. Previously the strategy that had been adopted by this company was to take the business growth offshore whereas the new strategy that was taken into consideration was to reduce the number of employees taking part in this activity. Hence it was decided that the existing US jobs would be offshored.
There were a number of benefits as well as discrepancies that were forming up due to the offshoring process. The major benefit was that the cost savings that resulted as a consequence of this practice would be huge. For example, the employment cost of a US programmer which is $112,000 (including the salary and incentives) would be replaced by an employee whose employment cost would sum up to $25,000 only. Considering this figure, the cost savings of the company were bound to take a positive dramatic move. Though the figures were extremely compelling, there were a few shortcomings associated with this decision. For instance, the people who would be taking up this job would be trained by the very people whom they would replace. Secondly, there were also a few political and economic repercussions associated with the offshoring process. John Kerry, the presidential candidate named this activity “Benedict Arnold CEOs”. The statement made it pretty clear as to why someone would pay such a high price for the training of employees if the skills were eventually being commoditized.
Another shortcoming that was observed as a consequence of offshoring was the loss of jobs in the manufacturing process. 1979 data shows that the US economy lost approximately 5 million jobs since the production level was low and also because the entire well-paid employees and jobs had been transferred and moved offshore.
How Should Offshoring Be Handled
Before taking the decision to offshore employees, the company needs to be well aware of its benefits as well as its shortcomings. Proper strategies need to be developed with the discrepancies and efficient channels need to be built so as to channelize the profits that are attained due to this.
It is difficult to decide whether offshoring would be beneficial or harmful for a company. For instance, the offshoring results show that there had been a lot of development due to this. However, in the Global Information Systems Company, negative effects were observed. The people who would be replaced were being paid less; in other words, it can be said that they were offering services at a low cost as compared to the offshored employees. It is very evident that the public would opt for the services that were being offered at low prices with the same quality. Therefore it is important for GIS to either raise the cost of the replaced employees or reduce the costs of the employees who were offshored. If proper steps are not taken to maintain a balance between both scenarios, offshoring would prove to be very harmful to the company instead of being beneficial.
It is also very important for the company to set up new goals, launch new products, and expand its growth, etc so that the replaced employees can be provided with work. This way there would be no gap in the manufacturing process of the company and the replaced employees would be provided with equal quality work like the ones who had been offshored. New jobs should be offered so that the company would be able to invest its savings in the proper direction without any wastage.
The rationale for the Recommendations
It is very important for the company to provide proper training to the replaced employees so that they are highly skilled and equally efficient. Moreover, they should also be granted sufficient salaries so that their services are worth it. And the services of the offshored employees should be lowered so that a balance can be maintained between both the employees. If this step is not taken, people would not opt for the offshored employees and would rather prefer to avail the services of the replaced employees.
Moreover, new jobs should be offered in order to keep the manufacturing operations running without any gap. A large gap is often observed in the operations and functions of the organization as soon as the employees are offshored, new jobs and plans should be devised so as to cover up this shortcoming.
Conclusion
Both positive and negative trends have been observed in the offshoring process. In order to make this process work and make it successful, the savings need to be channelized in the proper direction and efficient strategies need to be devised.
References
Harvard Business School. (2004). Offshoring at Global Information Systems.Inc. Seventh Edition, 229-239. 2005. Handbook of US Labor Statistics.