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discuss outsourcing and offshoring in the context of accounting and global…

- - - - • Automation: to replace human processes with automation
    - - : offshore low-level, routine work – take this away from roles of domestic employees
    - - Consolidation or centralisation is where similar activities across business units are combined so that they are conducted in one place, rather than each operating unit performing the same task themselves. This provides greater economies of scale, efficiency and more systematic processing without as many variations. In the case of offshoring, activities would often first be consolidated in one location onshore then moved offshore
    - - Shared activities can be commercialised ‘either by making them into a profit centre within the firm, or by spinning them off through an outsourcing arrangement’
    - - Shared activities can be relocated to a ‘carefully-chosen place, typically selected on the basis of cost or availability of employees, but sometimes for particular skills (e.g. language, data entry, analysis)
- - - - benefits
        
        The benefit of this is reduced transaction costs and greater opportunities to capture profits
      - costs
        
        , the side effect is a bigger, more complex organisation that has many more issues to manage. As such, businesses have been encouraged to outsource non-critical areas in order to focus on core competences
    - - The primary benefits of this model include: NBC
        • enhanced visibility of costs (that were otherwise hidden in a captive set-up);
        • the ability to use global best practices from vendors; and
        • the ability to add new service lines and address new markets without making substantial up front investments.
      - The challenges of this model include:SCRS
        
        • the risk of sharing confidential information, intellectual property and key knowledge;
        • the possibility of resistance from staff who will be affected by the integration and management of activities;
        • the social and cultural differences between the client and the offshore service provider; and
        • getting the level of service required from the offshore firm (Tarrant 2012).
        • the risk of sharing confidential information, intellectual property and key knowledge;
        • the possibility of resistance from staff who will be affected by the integration and management of activities;
        • the social and cultural differences between the client and the offshore service provider; and
        • getting the level of service required from the offshore firm (Tarrant 2012).
  - - - Outsourcing to an offshore service provider
    - - Captive (in-house) offshoring
        
        benefit:
        
        The key benefit of captive offshoring is total control over the cost and quality of services and all other elements of the process. Furthermore, the information is handled in-house, thus retaining talent and process knowledge
        
        issues
        
        First, there may be an increase in fixed costs due to the cost of non-core resources and the investment in overcapacity. Also, the firm is entirely dependent on in-house talent and must seek to retain and develop individuals while still trying to stay on top of global best practices.
      - BOOT
        
        For global companies: ‘BOOT’ model – Build, Own, Operate, Transfer
      - Re-onshoring
        
        bringing back offshore operations to the ‘home country’
      - Nearshoring
        
        offshoring to a country that is geographically close
  - - - describes the management and optimisation of business functions that have a predefined set of performance metrics. A specific example or type of outsourcing may involve moving functions to another country. This is referred to as ‘business process offshoring’. Thus when the term ‘BPO’ is used, it is prudent to clarify the form of outsourcing in question (local/offshore).
- - - - reasons for employee resistance
        
        There are many reasons why an employee might have a negative perception about a corporate offshore outsourcing plan. As mentioned in the study guide, CPA Australia members who judged their offshoring to be successful noted that the support from internal employees in the finance and accounting areas is deemed critical. This means addressing issues such as individuals being anxious about a change in their or their fellow employees’ responsibilities as well as the security of their jobs.
        For reasons of security, patriotism or other, an employee may feel uncomfortable taking an activity that was traditionally performed at ‘home’ and sending it overseas. An employee may also have negative feelings about offshore outsourcing based on something they read in the media or heard from someone in another organisation. For example, the most recent statistics, from the National Secretary of the Finance Union in Australia, suggest that 6000 finance sector jobs have been lost in Australia (Carter 2012).
  - - - Using a consultant to establish the outsourcing contract can have significant benefits, including better knowledge of regulations, lower negotiated prices, improved service level agreements and ensuring partners have shared values and aligned objectives.
      - A further consideration is the geographic location of offshore outsourcing, which can determine access to communication (across time zones), basic costs (and benefits such as the potential for reduced costs and the ability to focus on core activities) and general range of service offerings.
- - - - In the longer term, all indications are that foreign affiliates of Australian companies will continue to play a critical role in providing income and employment benefits for Australia (Cornell 2015). Asia is demanding high-quality services and it is expected that by 2030 Australia’s annual services exports to Asia would be worth AUD 163 billion, supporting one million jobs— compared in 661 000 jobs in 2014 (PWC, ANZ & Asialink Business 2015).