Offshore Outsourcing in Service Sector Essay Example | Topics and Well Written Essays - 2000 words

Offshore Outsourcing in Service Sector - Essay Example This essay stresses that  firms face complex decisions as they outsource reorganize the value chains as offshore outsource some activities. The firms consider the cost reduction, standardisation of product quality, human capital and risks involved in reorganizing their value chains. The reorganization of value chains have tended to retain the knowledge oriented skills in the industrialised nations while the lower value added functions are transferred to developing or less advanced countries. Certain industries demonstrate ‘path dependent’ tendencies towards concentration of the processes and people in certain localities of the advanced countries such as the Silicon Valley in California.As the paper highlights  the geographical concentration is driven by the access to talented software engineers and programmers. The proximity to large pool of sophisticated users also driven the locality concentration of such firms. The firms have realised the economic gains of geograp hically separating the programming functions to lower cost countries overseas while the introduction of networked computer terminals have added more impetus for relocation of the routine functions.  Offshoring software development in Ukraine is driven by the culture of research and availability of highly talented personnel due to reliance of IT technologies. The increased competitiveness has forced firms to reengineer in order to seek new knowledge and arbitrage costs.