Offshore Outsourcing

Definition

What is Offshore Outsourcing?

Offshore Outsourcing is a form of business process outsourcing where the organization or an individual seeks to outsource a business process or an entire operation to another country where labor is less expensive.

Offshoring has been a common practice these days, thanks to the advancement in technology and the growing global economy. It has helped companies from all over the world to increase their profits and bring down the cost of production.

One of the most common outsourcing practices is the offshoring of certain business processes like a call center, customer service, technical help desk, computer programming, transcription, research, and analysis, etc. They could be done at a lower cost in countries that have a large pool of skilled labor and competitive cost of operations.

Benefits of Offshore Outsourcing

Offshore outsourcing companies offer their clients skilled resources at a very marginal cost. The cost of developing resources from scratch to reach the level of quality would be very high. Even for common tasks, offshore vendors can conserve a lot of resources while providing the same result.

The main benefits of offshore outsourcing are:

  1. Access to a global talent pool. Access to a worldwide talent pool gives businesses the opportunity to avoid a skills gap, which is particularly crucial in the face of growing concerns over the availability of skills in the domestic market.
  2. Cost competitiveness. An offshore workforce can be hired at a much lower rate than a domestic one.
  3. Unique business opportunities. Many firms viewed offshore outsourcing as the first step to expanding their business globally, which led to globalizing their business.
  4. Improved ROI. One of the most important reasons for businesses to outsource is to improve ROI (return on investment). Firms realized that outsourcing is a key competitive strategy that can save time and money in the long term.

It’s a fact that throughout the world, most small to medium companies outsource their services to some other company, and generally, they end up saving a lot of money from this act.

Pro and cons of offshoring

Like any business operation, advantages and disadvantages are both present. Offshore outsourcing is no different. May it be large scale or small scale, there are always some pros and cons involved. However, the disadvantages of outsourcing are usually over-exaggerated while the advantages are usually overlooked.

Offshore outsourcing pros

  1. Get access to a pool of skilled resources, especially when there is a shortage of talent domestically.
  2. Leverage the same expertise at a lower cost, and also compete on the global market.
  3. Low Labor Cost: Labor is the largest percentage of the cost of producing a product or service in a business.
  4. Companies save on the cost of office space.
  5. They don’t have to invest in equipment or train new employees to fill vacancies.
  6. They can offer more competitive rates for services and products without increasing their prices.
  7. Symbiotic Process: Outsourcing is symbiotic. Both the corporation and outsourcer benefit from the relationships.

Offshore outsourcing cons

  1. Different time zones, language and culture, longer decision making and a lack of trust are some of the challenges faced during the offshoring process.
  2. Lack of technical collaboration that delays the speed of delivery and the level of quality.
  3. It comes with risks such as security breaches and intellectual property theft

The cons of offshoring can be avoided by working with an experienced offshore outsourcing partner who has been in the industry for many years and knows what they’re doing. They will also provide you with contract terms that will protect your company‘s assets so you don’t have to worry about security issues or intellectual property theft.

Offshore Outsourcing

 

Difference between offshore and onshore outsourcing

The main difference between offshore and nearshore outsourcing is that while both involve businesses relocating operations overseas, offshore refers to such relocation occurring in a foreign country whereas onshore relocation occurs within one’s own country or region.

Offshore Outsourcing

It is a process of outsourcing business processes, functions, computer services, and IT support and maintenance to a cheaper location, usually a country with a low cost of labor and other associated reasons. These reasons include low communication cost, cheaper operating cost, appealing labor cost, and skilled labor availability. 

As the name suggests, “offshore outsourcing” takes place outside a company’s own borders. For example, a company may outsource its call center operations to the Philippines.

Onshore

Onshore outsourcing is done when the resources you need for running your business are locally available to you. For example, if you operate an e-commerce store, you can hire a development company to build your e-commerce platform or you hire a company to create content for your website within your country or region.

On the other hand, “onshore outsourcing” takes place within a company’s own borders. For example, a company may outsource its human resources needs to a third-party executive search firm in the same country.

There are many benefits for both types but offshoring is best used when looking for an economical solution. There are many more benefits for onshore outsourcing such as geographical proximity, cultural similarities, and greater ease in managing projects and employees with no time zone differences.

Examples of offshore staffing

Call centers and BPOs are the most immediate examples of offshore outsourcing companies. They perform services that support customer-facing processes for U.S. or other companies that are in industries such as travel, retail, healthcare, and telecommunications. Call center companies are the most readily identifiable and known for their outsourced business operations.

An example of the offshoring process involves a US company hiring a Philippine offshore partner to provide customer service, and a US computer company hiring an Indian offshore outsourcing company to provide programming for their company.

Why do companies offshore?

There are many different reasons business owners decide to offshore certain operations. These are:

  1. The most common reason a business may have offshore operations is to save money. It is well known that manufacturing costs and labor costs are far lower in countries where the cost of living is much lower. 
  2. For a better, educated workforce. In some countries, there is a better work attitude than in other Western countries.
  3. To save time and gain access to a larger talent pool.
  4. To access better Infrastructure and technology.
  5. Productivity: In markets with young and fast-growing workforces, workers are more motivated than their counterparts in the developed countries.

Offshore Outsourcing Philippines

The Philippines have long been an attractive outsourcing location and is touted to be such in many publications by enterprising authors. While the cost-saving of outsourcing to the Philippines has indeed attracted many outsourcing companies to set up shop, the cost savings is only 1 of the factors that contribute to the attractiveness of the Philippines for outsourcing.

Beyond the low wages of offshoring, the Philippines has the benefit of a ready-made English-speaking workforce that is highly-educated and hungry for work which is rare to find in low-cost outsourcing destinations like India and China.

If you are looking for more information on outsourcing to the Philippines you can contact Digital Minds BPO and get a free consultation. We will provide you with an offshore team to help you with your business processes. Our offshore outsourcing services start with as little as $4 per hour and you save up to 70% on staffing costs. We offer business process outsourcing solutions that help businesses save time, money, and resources.

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