Real costs of outsourcing to India



Many UK manufacturers have transferred their production to low-cost regions to reduce costs. But a new study has discovered that these savings are not as substantial as they first seemed. Cheap labour has been an incentive for manufacturers to outsource to India, but there are many uncertainties and risks involved in having a distance between the host location and the outsourcer. These uncertainties and risks can lead to unexpected costs for example, rising oil prices affect shipping costs which can offset any gains made from cheap labour or, in some cases, result in losses to the outsourcer. A recent study by Drs Ken Platts and Ninghua Song of the Centre for Strategy and Performance in the Institute for Manufacturing has investigated the real costs involved in sourcing from China.


  • Whenever critics of globalization complain about the loss of American jobs to low-cost countries such as China and India, supporters point to the powerful performance of the U.S. economy. Despite the latest slow quarter, official statistics show that America's economic output has grown at a solid 3.3% annual rate since 2003, a period when imports from low-cost countries have soared. Similarly, domestic manufacturing output has expanded at a decent pace. On the face of it, outsourcing doesn't seem to be having much of an effect at all.

    The strong earnings growth of U.S.-based corporations is still real, but it may be that fewer of the gains are coming from improvements in domestic productivity. In fact, holding down costs by moving key tasks overseas could be having a greater impact on corporate earnings than anyone guessed or measured.

There are investing implications, too, although those are harder to quantify. Companies with their primary focus in the U.S. might suddenly seem less attractive, since underlying economic growth is slower here than the numbers show. But if the statistical systems of other developed countries suffer from the same problem--and they might--then growth in Europe and Japan might be overstated, too.

  • "To be effective, offshore outsourcing should be very selectively focused on the specific activities and types of work that can be done more efficiently offshore; otherwise you're just playing a game of labor rate arbitrage and our experience indicates that, in the long run, this can backfire on you."

  • Cost factors:

    As this point is quite clear, it is clear that outsourcing a work would definitely bring down the cost involved in getting work done. When skilled and permanent labor can be employed, with an environment having latest technologies installed to add to the advantages, and all this at an affordable cost that is definitely not possible to be obtained in the parent country, it is only very obvious as to why companies should outsource their works to countries like India, where the percentage of literate and learned people are also more.

  • With all these factors and many more, it is quite an apt decision to outsource to India, to get quality and reliable work done. Also another important factor to be noted is that the third party company that is chosen should be experienced and highly capable company like Macronimous, who have expertise in handling outsourced works efficiently.

  • Macronimous is an offshore web development company. Based in India, we have our offices in the US, UK, Australia. We have our clientele based from all the parts of the world. Our services include web application development, web designing and Mobile and Handheld solutions. Our business is to help you develop your business.

  • Outsource to India...Read More
    Pros and cons of Legal Process Outsourcing and the Indian scene...Read More


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