**Abstract**

The world has become a global village with companies investing in different nations to remain afloat and competitive. In the process of offshoring- outsourcing, companies and nations have become interdependent in their efforts to bridge the supply chain network. However, during a pandemic, such as the Coronavirus (COVID-19) that involved the closure of borders, and during which there was a high demand of lifesaving machines and personal protective equipment, many countries were left scrambling for critical medical products such as ventilators and personal protective equipment for doctors. Hence, the tendency away from offshoring and outsourcing to onshoring production. COVID-19 has elicited that countries need to invest in an onshore business if they are to remain afloat. However, investing in onshore (local) business calls for a tradeoff, which some countries cannot afford. Many countries lack skilled labour (developing countries), and where available, it is too expensive (developed countries) making onshore an expensive venture. Besides, promoting manufacturing companies means increased air pollution and greenhouse gases that are responsible for 4.2–7.0 million premature deaths every year, and which costs \$4.6 trillion per year. Such death rates and cost can hinder the onshore business. Therefore, for countries to survive in the era of a pandemic, the best alternative is to build strong ties with offshore-outsource nations.

**Keywords:** coronavirus, air pollution, manufacturing, public health, president trump, COVID-19, pandemic, outsourcing, Onshoring, supply chain

### **1. Introduction**

Offshoring is the act of delegating part of business work to an external and/or internal entity that is located somewhere else. Outsourcing involves obtaining certain services/products from a third party, while offshoring companies relocate some of their services/product lines to regions that offer them a competitive advantage. Due to the unifying factor of competitiveness, offshoring and outsourcing can be entangled, leaving a very thin line to separate them—especially in the service sector. Offshoring-outsourcing can involve captive outsourcing, nearshoring, and onshoring, depending on the location of the firm. By 2019, India was the number one

destination for most offshore-outsourcing activities, owing to its financial attractiveness and skilled labour [1].

Since 2000, the revenue of the global outsourced services industry had been rising steadily, reaching a peak in 2011, after which it started losing ground, as illustrated by the graph in **Figure 1**. In 2016, the industry market size dropped to USD 76.9 billion, the lowest revenue since 2005. The largest share of the revenue for this industry came from the Americas, followed by Europe and the Middle East, while Africa barely featured. A much smaller share of global revenue came from the Asia-Pacific region [2]. The cardinal role of outsourcing-offshoring is to cut costs such as taxes and production. Some other drivers include enabling a focus on the core business and solving capacity issues. Apart from information technology that accounts for more than 50% of the global outsourcing revenue, other major sectors include business services, energy, healthcare and pharmaceuticals, retail, travel and transport, and telecom and media. **Figure 2** depicts the contribution of some of the selected sectors. However, since the outbreak of COVID-19, many industries have since been affected, causing slack in outsourcing/offshoring.

Ever since the first case of the novel coronavirus (2019-nCoV), was detected in Wuhan, China, towards the end of 2019, and declared a global pandemic on 11th March by the World Health Organisation (WHO) [3], attention has now turned to how countries can survive and revive their economies in the new normal. The magnitude of the resultant shock from COVID-19 has not only tested the healthcare and disaster management systems of countries and the agility of policy responses to a public health catastrophe, but it has also significantly impacted businesses and their offshore-outsourcing processes. Unprecedented interruptions to business-asusual have quickly cascaded across industries and geographies, especially with the implementation of stay-at-home orders in all sub-Saharan countries.

In this chapter, we present how medical industry and other industries have been impacted during the COVID-19 pandemic in relation to offshoring-outsourcing business. COVID-19 pandemic resulted in border closure forcing nations to rethink of onshoring; in this chapter we present the tradeoffs between outsourcing-offshoring and onshoring.

**105**

**2. Medical sector**

**Figure 2.**

*(in billion USD).*

domestic production of drugs.

*Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply…*

Worldwide, the primary goals of the healthcare sector are to cut costs and improve the quality of care. With the acceleration of globalisation, healthcare services are impacted by healthcare outsourcing and offshoring [4]. The healthcare sector's reliance on offshoring-outsourcing is more pronounced in today's operating environment. Many incidences during the ongoing pandemic pointed towards either shortages or the non-availability of various materials at the point of requirement or consumption. The items included, among others, face masks and shields, hand sanitisers, surgical-grade materials, and other daily health supplies, escalating

*Comparison of the total contract value in the global outsourcing market by industry from 2008 to 2011* 

Despite the opportunities for synergies and improved efficiencies of outsourcing/

offshoring, the undertakings are more complex and create longer and more fragmented supply chains which could have disastrous consequences, particularly in the healthcare context [6]. In the first quarter of 2020 (the COVID-19 pandemic), the impact on the production and shipment of pharmaceuticals was not felt. However, the delivery of critical items, such as chemicals, soon started dwindling. The impact led regulators and world leaders to assess the extent to which China dominates the world's supply of active pharmaceutical ingredients and their chemical raw materials. An ongoing industry effort in the US and Europe to rebalance the pharmaceutical chemical supply chain is likely to be energised by government initiatives to ensure

As the coronavirus virus (COVID-19) pandemic has spread, health facilities have become overwhelmed, with potentially infectious patients seeking testing kits and personal protective equipment (PPE) (goggles, gloves, face shield and masks, air-purifying respirators and gowns). These critical items, which have been either outsourced or offshored, are in high demand. Many locations have experienced a scarcity of these products, at a time when they are needed most to care for highly

the 'bullwhip' effect on supply chains leading to onshoring [5].

*DOI: http://dx.doi.org/10.5772/intechopen.95281*

**Figure 1.** *Global market size of outsourced services from 2000 to 2019 [2].*

*Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply… DOI: http://dx.doi.org/10.5772/intechopen.95281*

**Figure 2.**

*Outsourcing and Offshoring*

ness and skilled labour [1].

destination for most offshore-outsourcing activities, owing to its financial attractive-

Since 2000, the revenue of the global outsourced services industry had been rising steadily, reaching a peak in 2011, after which it started losing ground, as illustrated by the graph in **Figure 1**. In 2016, the industry market size dropped to USD 76.9 billion, the lowest revenue since 2005. The largest share of the revenue for this industry came from the Americas, followed by Europe and the Middle East, while Africa barely featured. A much smaller share of global revenue came from the Asia-Pacific region [2]. The cardinal role of outsourcing-offshoring is to cut costs such as taxes and production. Some other drivers include enabling a focus on the core business and solving capacity issues. Apart from information technology that accounts for more than 50% of the global outsourcing revenue, other major sectors include business services, energy, healthcare and pharmaceuticals, retail, travel and transport, and telecom and media. **Figure 2** depicts the contribution of some of the selected sectors. However, since the outbreak of COVID-19, many industries have

Ever since the first case of the novel coronavirus (2019-nCoV), was detected in Wuhan, China, towards the end of 2019, and declared a global pandemic on 11th March by the World Health Organisation (WHO) [3], attention has now turned to how countries can survive and revive their economies in the new normal. The magnitude of the resultant shock from COVID-19 has not only tested the healthcare and disaster management systems of countries and the agility of policy responses to a public health catastrophe, but it has also significantly impacted businesses and their offshore-outsourcing processes. Unprecedented interruptions to business-asusual have quickly cascaded across industries and geographies, especially with the

In this chapter, we present how medical industry and other industries have been impacted during the COVID-19 pandemic in relation to offshoring-outsourcing business. COVID-19 pandemic resulted in border closure forcing nations to rethink of onshoring; in this chapter we present the tradeoffs between outsourcing-offshoring

since been affected, causing slack in outsourcing/offshoring.

implementation of stay-at-home orders in all sub-Saharan countries.

**104**

**Figure 1.**

*Global market size of outsourced services from 2000 to 2019 [2].*

and onshoring.

*Comparison of the total contract value in the global outsourcing market by industry from 2008 to 2011 (in billion USD).*

## **2. Medical sector**

Worldwide, the primary goals of the healthcare sector are to cut costs and improve the quality of care. With the acceleration of globalisation, healthcare services are impacted by healthcare outsourcing and offshoring [4]. The healthcare sector's reliance on offshoring-outsourcing is more pronounced in today's operating environment. Many incidences during the ongoing pandemic pointed towards either shortages or the non-availability of various materials at the point of requirement or consumption. The items included, among others, face masks and shields, hand sanitisers, surgical-grade materials, and other daily health supplies, escalating the 'bullwhip' effect on supply chains leading to onshoring [5].

Despite the opportunities for synergies and improved efficiencies of outsourcing/ offshoring, the undertakings are more complex and create longer and more fragmented supply chains which could have disastrous consequences, particularly in the healthcare context [6]. In the first quarter of 2020 (the COVID-19 pandemic), the impact on the production and shipment of pharmaceuticals was not felt. However, the delivery of critical items, such as chemicals, soon started dwindling. The impact led regulators and world leaders to assess the extent to which China dominates the world's supply of active pharmaceutical ingredients and their chemical raw materials. An ongoing industry effort in the US and Europe to rebalance the pharmaceutical chemical supply chain is likely to be energised by government initiatives to ensure domestic production of drugs.

As the coronavirus virus (COVID-19) pandemic has spread, health facilities have become overwhelmed, with potentially infectious patients seeking testing kits and personal protective equipment (PPE) (goggles, gloves, face shield and masks, air-purifying respirators and gowns). These critical items, which have been either outsourced or offshored, are in high demand. Many locations have experienced a scarcity of these products, at a time when they are needed most to care for highly

infectious patients. An increase in PPE supply, in response to this new demand, would require a large increase in PPE manufacturing. An alternative is to outsource homemade masks, which feasibly could include scarves or bandanas. Some countries have even resorted to using unconventional solutions for PPE at local hospitals, such as plastic water bottle cut-outs for eye protection and plastic garbage bags for gowns. Calls for continuity of supplies through the repurposing of industrial capacity and other means seem unlikely to solve the shortage quickly enough, as supply chains have become more dysfunctional during the pandemic [7] and the global crisis can no longer be contained.

With the urgent need for a rapid acceleration in the manufacturing process for a wide range of test-kits (antibody tests, self-administered, and others), outsourcing and offshoring will play a crucial role in this endeavour. By 2019, the global medical device outsourcing market size was valued at USD 104.5 billion, and it was expected to grow at a compound annual growth rate (CAGR) of 5.2% from 2015 to 2030. Due to the increased spending on contract research organisation (CRO) services, the market for medical device outsourcing is expected to increase during the forecast period. As there is an increased demand for medical devices due to the rising prevalence of chronic diseases, various companies are shifting their focus to research and development, and are outsourcing medical devices [8].

Changes to the ISO standards are likely to drive the demand for specialists in regulatory affairs and quality assurance service providers in the developed countries, precisely due to small-medium enterprises requiring third-party assistance to comply with the new ISO standards. Original equipment manufacturers and subcontractors in developed countries, such as Canada, Japan, the US, and European Union countries, are anticipated to adopt new ISO standards, thereby driving the market for medical device outsourcing [9]. In addition, recent regulatory changes in Europe relating to the quality and outsourcing of medical devices are also anticipated to increase the demand for quality assurance services and regulatory affairs, thereby, accelerating the outsourcing offshoring market growth [9]. **Figure 3** shows the projected revenue growth of the outsourced medical service market.

Previously, medical device companies have tended to deliver value, mainly through outsourcing manufacturing and selling their products. However, in the new normal, with mounting pressure on the healthcare system, there are foundational

**107**

*Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply…*

shifts in the care delivery model, and as a result, the industry value chain is set for a drastic overhaul. Therefore, companies will need to step out of their conventional manufacturing role [10]. The WHO reiterated this call to governments and industry to increase PPE manufacturing by 40% to meet rising global demand, and to avoid the severe and mounting disruption to the global supply of PPE being caused by rising demand, panic buying, hoarding and misuse. Thus, putting lives at risk from COVID-19 and other infectious diseases. There is no doubt that the lack of PPE puts health workers and patients at high risk of being infected and infecting others with

Many outsourcing companies that have offshored operations in countries like India, China, Singapore and Vietnam have been devastated by the crisis. Since the global lockdown in March, companies have been failing to deliver orders due to the labour force being forced to stay home. However, although the global crisis damaged businesses, not all companies are losing money. As more people are working from home, the demand for technology that enables online group meetings has skyrocketed. For example, shares in Zoom™ video conferencing companies have risen by 50% since February 2020. Similarly, the demand for TV shows and movies to watch at home soared to the extent that giant streaming services like Netflix™ and YouTube™ reduced the quality of their streaming in Europe to ease the pressure on the internet. Thus, the offshoring-outsourcing of information technology and streaming services is expected to increase post-pandemic to meet the high demand. The outsourced service industry seems to be less affected, and where it is affected, it is expected to recover shortly, as giant companies will be looking for better ways to cut costs in the post-pandemic era. However, the manufacturing industry has been strongly hit since it involves the movement of parts. In the midst of the pandemic, customers need advanced technology and automation to cope with the uncertainties that companies have been grappling with for the last decade. The outbreak of the coronavirus affected the supply chain and disrupted the supply chain/operation of manufacturing across the world. Companies that heavily offshore-outsource in Vietnam, China and India have been the most vulnerable. The global automotive industry, which imports more than \$14 billion (by 2017) in motor parts from China annually, was significantly impacted [12]. In fact, companies throughout the supply chain are being forced to make tough decisions, like slowing or halting production, resourcing products, and re-evaluating revenue. For example, the Italian-American automobile manufacturer, Fiat Chrysler Automobiles,

The Indian outsourcing market is worth approximately \$50 billion [14]. This includes companies that work in application development areas, such as quality assurance testing services. Companies that rely on outsourcing firms in India range from financial services providers to major technology companies, to name just two of many industries. However, outsourcing firms were simply not prepared for the pandemic and the ensuing lockdown. Outsourcing companies lacked the infrastructure to work remotely while continuing to manage the performance of their teams and meeting client requirements, and their customers are now feeling the pain in the loss of business continuity. Especially in offshore locations, much of the workforce has not previously been set up for this work-from-home scenario, presenting new tactical and operational challenges [15]. The notion of 'work from home' is generally not supported by outsourcing companies, and they do not typically provide workers with laptops to use at home. Even if workers have the technology to

*DOI: http://dx.doi.org/10.5772/intechopen.95281*

COVID-19 [11].

**3. Other industries**

halted their production in Serbia [13].

**Figure 3.** *Global medical device sales forecast [8].*

*Offshoring-Outsourcing and Onshoring Tradeoffs: The Impact of Coronavirus on Global Supply… DOI: http://dx.doi.org/10.5772/intechopen.95281*

shifts in the care delivery model, and as a result, the industry value chain is set for a drastic overhaul. Therefore, companies will need to step out of their conventional manufacturing role [10]. The WHO reiterated this call to governments and industry to increase PPE manufacturing by 40% to meet rising global demand, and to avoid the severe and mounting disruption to the global supply of PPE being caused by rising demand, panic buying, hoarding and misuse. Thus, putting lives at risk from COVID-19 and other infectious diseases. There is no doubt that the lack of PPE puts health workers and patients at high risk of being infected and infecting others with COVID-19 [11].

## **3. Other industries**

*Outsourcing and Offshoring*

no longer be contained.

infectious patients. An increase in PPE supply, in response to this new demand, would require a large increase in PPE manufacturing. An alternative is to outsource homemade masks, which feasibly could include scarves or bandanas. Some countries have even resorted to using unconventional solutions for PPE at local hospitals, such as plastic water bottle cut-outs for eye protection and plastic garbage bags for gowns. Calls for continuity of supplies through the repurposing of industrial capacity and other means seem unlikely to solve the shortage quickly enough, as supply chains have become more dysfunctional during the pandemic [7] and the global crisis can

With the urgent need for a rapid acceleration in the manufacturing process for a wide range of test-kits (antibody tests, self-administered, and others), outsourcing and offshoring will play a crucial role in this endeavour. By 2019, the global medical device outsourcing market size was valued at USD 104.5 billion, and it was expected to grow at a compound annual growth rate (CAGR) of 5.2% from 2015 to 2030. Due to the increased spending on contract research organisation (CRO) services, the market for medical device outsourcing is expected to increase during the forecast period. As there is an increased demand for medical devices due to the rising prevalence of chronic diseases, various companies are shifting their focus to research and

Changes to the ISO standards are likely to drive the demand for specialists in regulatory affairs and quality assurance service providers in the developed countries, precisely due to small-medium enterprises requiring third-party assistance to comply with the new ISO standards. Original equipment manufacturers and subcontractors in developed countries, such as Canada, Japan, the US, and European Union countries, are anticipated to adopt new ISO standards, thereby driving the market for medical device outsourcing [9]. In addition, recent regulatory changes in Europe relating to the quality and outsourcing of medical devices are also anticipated to increase the demand for quality assurance services and regulatory affairs, thereby, accelerating the outsourcing offshoring market growth [9]. **Figure 3** shows

the projected revenue growth of the outsourced medical service market.

Previously, medical device companies have tended to deliver value, mainly through outsourcing manufacturing and selling their products. However, in the new normal, with mounting pressure on the healthcare system, there are foundational

development, and are outsourcing medical devices [8].

**106**

**Figure 3.**

*Global medical device sales forecast [8].*

Many outsourcing companies that have offshored operations in countries like India, China, Singapore and Vietnam have been devastated by the crisis. Since the global lockdown in March, companies have been failing to deliver orders due to the labour force being forced to stay home. However, although the global crisis damaged businesses, not all companies are losing money. As more people are working from home, the demand for technology that enables online group meetings has skyrocketed. For example, shares in Zoom™ video conferencing companies have risen by 50% since February 2020. Similarly, the demand for TV shows and movies to watch at home soared to the extent that giant streaming services like Netflix™ and YouTube™ reduced the quality of their streaming in Europe to ease the pressure on the internet. Thus, the offshoring-outsourcing of information technology and streaming services is expected to increase post-pandemic to meet the high demand.

The outsourced service industry seems to be less affected, and where it is affected, it is expected to recover shortly, as giant companies will be looking for better ways to cut costs in the post-pandemic era. However, the manufacturing industry has been strongly hit since it involves the movement of parts. In the midst of the pandemic, customers need advanced technology and automation to cope with the uncertainties that companies have been grappling with for the last decade. The outbreak of the coronavirus affected the supply chain and disrupted the supply chain/operation of manufacturing across the world. Companies that heavily offshore-outsource in Vietnam, China and India have been the most vulnerable. The global automotive industry, which imports more than \$14 billion (by 2017) in motor parts from China annually, was significantly impacted [12]. In fact, companies throughout the supply chain are being forced to make tough decisions, like slowing or halting production, resourcing products, and re-evaluating revenue. For example, the Italian-American automobile manufacturer, Fiat Chrysler Automobiles, halted their production in Serbia [13].

The Indian outsourcing market is worth approximately \$50 billion [14]. This includes companies that work in application development areas, such as quality assurance testing services. Companies that rely on outsourcing firms in India range from financial services providers to major technology companies, to name just two of many industries. However, outsourcing firms were simply not prepared for the pandemic and the ensuing lockdown. Outsourcing companies lacked the infrastructure to work remotely while continuing to manage the performance of their teams and meeting client requirements, and their customers are now feeling the pain in the loss of business continuity. Especially in offshore locations, much of the workforce has not previously been set up for this work-from-home scenario, presenting new tactical and operational challenges [15]. The notion of 'work from home' is generally not supported by outsourcing companies, and they do not typically provide workers with laptops to use at home. Even if workers have the technology to work from home, including internet connections and secure systems access, many outsourcing firms require client permission for them to do so.

The outsourcing-offshoring industries do not lend themselves to working from home. For example, because of security concerns, some companies even ask employees to leave even their pens and pencils outside the office. Specifically, the companies that relied on outsourcing firms for their testing services were left in a lurch. Digital quality is now more critical than ever, given our global reliance on digital experiences, and the companies providing those digital experiences are unable to get the testing they need from offshoring-outsourcing firms. In technology, offshoring is simply moving testing from one office to another. Due to cultural and technological factors, that new office may be less capable of ensuring business continuity during a crisis. In addition, offshoring testing services does not equate to an increase in skill sets or the ability to do different types of testing.
