Company owners know the best moves in maintaining a good reputation in the industry. Longevity and the ability to adapt to the latest trends and keep up with the demand of customers is always the key to client satisfaction and success. Nowadays, a wide range of business strategies are available to entrepreneurs who want to expand their organizations, and continuously deliver the needs and wants of their client base.
Outsourcing is a popular business practice that encourages owners to tap the help of a third-party service provider to perform business activities and functions on the company’s behalf. This practice is helping many organizations in saving costs, improving customer service quality, active talent acquisition, and potential business expansion. While outsourcing tasks already has a proven global impact on many industries, there is one strategy under outsourcing that is slowly becoming a necessity for businesses: Offshoring.
What is offshoring?
Offshoring is a strategy under outsourcing. It is the process of relocating business processes or entire businesses to another country. Software development, financial processing, and IT services are just a few of the most common business activities that companies do offshore.
How is offshoring different from outsourcing?
To understand the differences between the two, take note first of the similarities. Outsourcing and offshoring are two setups where companies choose third-party agencies and firms outside the company premises to perform specific tasks with the help of competent manpower. Just like outsourcing, companies usually offshore to minimize operational and overhead costs, and at the same time, focus on the core business activities.
One key difference between the two is that outsourcing usually entails contracting out specific tasks or projects, while offshoring often involves relocating entire business operations.
Another distinction is that outsourcing can be done within the same country (i.e., domestic outsourcing) while offshoring always involves moving operations to a different country (i.e., offshore outsourcing).
The differences between these two revolve around different aspects such as work assignments, timeline, involvement, work quality, and time and scalability.
What are the benefits of offshoring?
Hiring a service provider in a faraway location might be worrisome for business owners. Aside from the different timezones, lack of complete control over operations, cultural barriers and language differences are the main concerns of company owners who want to invest in hiring teams from an offshore location to perform business functions and focus on revenue-generating activities of the company.
These challenges, however, can be overcome through regular training and skills development sessions, and a clear and concise service level agreement between the business owner and the offshoring partner. In the case of industry leaders like Facebook and Twitter, which are companies known for offshoring their content moderation services, the advantages overpower the risks.
If you are a business owner having a difficult time deciding whether you should offshore some of your business tasks and functions, here are some of the benefits of offshoring that you and your in-house team can enjoy when you start offshoring:
1. Cost Savings
Just like outsourcing business activities, companies that offshore their operations and services also enjoy the cost benefits that service providers offer. International companies invest in outsourcing and offshoring their services to cut labor costs and make the company more scalable.
In offshoring, your service provider’s recruitment team will be in charge of hiring agents who will be working in your offshore team. The expenses involved in recruitment, hiring process, and training are more affordable in certain regions in Asia like the Philippines and India, because of the lower cost of living that their citizens have, compared to other countries. A lower cost of living also means lower average salaries and bigger funds to invest in monitoring projects or purchasing new equipment that your in-house teams need.
You get to serve your clients and connect with them 24/7 without paying so much. Offshoring call centers in the Philippines only costs $6 to $14 per hour. Check the brief pricing comparison of offshore call center costs per location:
|Country / Region
|Cost per hour
|United States / Canada
|$22 – $40
|$12 – $25
|$35 – $50
|Africa / Middle East
|$16 – $20
|$8 – $20
|Asia / Philippines
|$6 – $14
|$5 – $12
|$6 to $12
As you can see, the costs in countries in the Asia Pacific are relatively affordable, but there are plenty of reasons why this gem in Southeast Asia is the perfect offshore destination for your business.
2. Staff Flexibility
If you are a business owner with a company operating in Western countries and regions, having a reliable team who can perform different tasks 24/7 despite time zone differences is a must. Even in service crew positions in fast food restaurants, you can meet staff working in rotating shifts and late business hours: in the morning, afternoon, and even late in the evening. Offshore teams can work in different time zones without compromising the quality of their outputs.
With this, foreign companies registered in expensive locations like Europe and Australia are seeking the help of outsourcing companies in South East Asian regions in forming cross-cultural teams with experience in customer service.
3. Access to a Larger Talent Pool
The best offshore teams in the BPO industry are made of top-caliber talents. And when we talk about top-caliber talents, for example, international teams are not limited to English proficiency and communicating in official languages and dialects. Companies like Accenture and Digital Minds BPO hire the best-skilled agents and project managers with adept knowledge in different fields. If talent shortage is one of your concerns, then letting your offshoring partner choose the best foreign employees to form your remote team is an ideal move for you.
Aside from hiring graduates from prestigious and reputable universities, they also recruit experienced professionals in different categories of industries like banking institutions and tech companies to work under financial services and payroll services, and IT-related services. With a relatively low cost of labor and training, you can optimize your business operations with the help of your offshore staff. You may actually set your own recruitment and selection guidelines before signing an agreement so that you can ensure that your service and skills standards for employees will be followed.
4. Cultural Diversity
Now, this one may seem like a problem for some business owners. But believe it or not, cultural diversity could benefit your company. Culture fit is an essential part of outsourcing and offshoring business operations and if you choose to offshore, you can acquire certain levels of knowledge and exposure to different cultures and foreign market trends as well which can be beneficial for your expansion plans.
Take Filipino teams for example, in BPO companies, they are known to be competitive yet friendly, so effort and camaraderie go well together. It is a part of the Filipino culture to be accommodating and respectful of foreigners and Western cultures, so your in-house team won’t have any issues communicating and collaborating with your remote team.
5. Regulatory and Taxes
One of the business risks involved in offshoring your business process has something to do with tax regulations and policies of the country where your offshore company is registered. Since offshoring is a huge business decision to make, compliance with foreign laws in income and taxes is crucial. Many foreign countries offer tax breaks and monetary incentives to encourage international companies to offshore their business processes.
Moreover, national and local governments of countries like India and the Philippines have full support to the BPO sector because of the high number of job opportunities that it provides to citizens. In fact, BPO employees are given comprehensive health benefits and incentives to make sure that they can provide quality services to foreign clients even in the comforts of their homes.
What are the types of offshoring?
There are two common types of offshoring:
1. Production Offshoring
This type of offshoring takes place when a company establishes its overall manufacturing operations in a different country. For example, a company manufacturing rubber slippers would set up its manufacturing site in Zamboanga Sibugay (the rubber capital of the Philippines) – the entire operation which includes sourcing of raw materials, quality control, packing, and other supply chain and logistics-related processes will be done in the host country.
2. Services Offshoring
An offshoring type that enables business owners to set up teams and units in overseas locations to carry out special tasks and functions. In this type of offshoring, the core control belongs to the service provider starting from the recruitment, hiring, and selection process, down to the training and evaluation of staff performance along with a specific set of KPIs.
If you choose this type of offshoring, make sure that you can still oversee the operations, and you still take part in the decision-making process by drafting a service level agreement that is fair for you and your offshoring partner.
What services can you offshore?
From basic tasks to complex tasks, offshoring can help you save costs and strengthen the core activities of your company. Here are some of the most common tasks that business owners and foreign investors offshore:
- Specialized IT Services
- Drafting and Estimation
- Accounting and Bookkeeping
- Digital Marketing
- Data Entry
- Virtual Assistance / Admin Services
- Executive Coaching / Sales Coaching
- Human Resource Management
- Customer Service
What are the top offshoring destinations?
- South Africa
Key Takeaways: Benefits of Offshoring
Focusing on your company’s core functions can be more challenging if you lack manpower, equipment, and technology to optimize your business operations. With offshoring, you can gradually enter the overseas market, learn the importance of cultural diversity in business, and reduce overhead expenses and labor costs.
Make sure to choose a reputable offshore partner that can help your in-house departments facilitate continuous workflow and produce quality outputs that will satisfy your clients. Take note that having a reliable offshoring partner can give you the competitive edge that will guarantee your top spot and longevity in the industry.
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