Which of the following is true about offshoring?
A. The smaller and newer a vendor, the better it is for the company to conduct business.
B. Small overseas upstarts do not take risks that larger, more established contractors take.
C. Any work that is proprietary and requires tight security should be offshored.
D. A company should avoid outsourcing work that is self-contained and does not need exchange of information.
E. Small overseas upstarts often promise more than they can deliver.
The correct answer and explanation is :
The correct answer is:
E. Small overseas upstarts often promise more than they can deliver.
Explanation:
Offshoring refers to the practice of relocating business processes, services, or manufacturing to a foreign country, typically to reduce costs and improve efficiency. While offshoring can bring significant advantages such as lower labor costs and access to specialized skills, it also comes with challenges and risks, particularly when working with smaller or newer vendors.
Why Option E is Correct:
Small overseas upstarts often lack the necessary experience, infrastructure, and financial stability to handle large or complex projects. To attract business, they may overpromise their capabilities, delivery timelines, or quality standards, which can lead to project delays, cost overruns, and quality issues. Companies must conduct thorough due diligence before partnering with offshore vendors, ensuring they have a proven track record and the necessary resources to meet expectations.
Why the Other Options Are Incorrect:
- A. “The smaller and newer a vendor, the better it is for the company to conduct business.”
- This is incorrect because newer vendors may lack experience, and smaller vendors may struggle with scalability and resource availability.
- B. “Small overseas upstarts do not take risks that larger, more established contractors take.”
- This is false; smaller vendors may take greater risks to compete with larger firms, sometimes at the cost of quality or security.
- C. “Any work that is proprietary and requires tight security should be offshored.”
- Sensitive work should generally be kept in-house or outsourced to trusted, highly secure vendors to minimize data breaches or intellectual property theft.
- D. “A company should avoid outsourcing work that is self-contained and does not need exchange of information.”
- Self-contained tasks can be ideal for outsourcing, as they require minimal coordination, making offshoring easier.
Thus, option E is the most accurate statement about offshoring risks.