Everything You Need to Know About Offshore Outsourcing
For starters, offshore outsourcing is just the process of hiring another organization in another country to perform certain jobs or services for your business. With so many unknowns, outsourcing offshore could be a little intimidating at first, but here we will tell you everything you need to know.
Competition is high for most businesses. With ever-increasing government-applied restrictions and taxes, companies are looking for every opportunity to reduce cost while maintaining the quality of services or products. More and more businesses are hiring offshore outsourcers in countries where work is difficult to find, and wages are below U.S. wage levels.
Some of the most common services that are outsourced offshore are:
- IT-related functions
- Customer service/call center
- Web/software development
- Graphic design
- Back office support, including data entry
More and more companies are considering outsourcing and offshoring their work as a potential way to reduce costs and streamline their operations. For example, General Electric (GE) has about 11,000 employees in India. They are mostly agents in call centers, but recently GE also hired about 400 people to analyze credit card data and market trends.
Lower costs aren’t the only advantage of outsourcing since lower cost produces flexibility. You’re able to just pay for what you need when you need it. This gives you more resources to work with than if you would have total operations in the U.S.
Quick stats on outsourcing:
- The IT outsourcing market is expected to reach 397.6 billion worldwide by 2025.
- 78% of businesses nationwide feel optimistic about their outsourcing partners.
- 71% of financial services companies outsource or offshore some of their services.
- Nearly 54% of all companies use third-party support teams to connect with customers.
Global outsourcing revenue was at $104.6 billion in 2014 but dropped to $88.9 billion the following year. Outsourcing statistics from 2021 show that the trend of revenue running up and down has continued, and due to COVID-19 these numbers are yet to stabilize.
Benefits of Offshore Outsourcing
One of the most significant advantages of offshoring is the lower labor costs. With the rising United States employee salaries, many companies are outsourcing service jobs offshore; it garners huge savings to hire foreign workers to do the same work for less money than it may cost in the U.S. It also lowers the operational costs of a business. Contracting out work could lower overhead expenses as well as the need for additional in-house employees.
Support functions, while needed for any business, unfortunately, don’t make money. Instead, they make it possible for you to make money — use the extra money you will save by outsourcing to invest in increasing your bottom line.
Enhanced Focus on Core Business Tasks
Next to cost savings, the second biggest benefit is that the extra resources could be used towards your core business operations and marketing, which ultimately increases profits. Outsourcing some of the workloads to another source gives businesses more time to focus on more important things like strategies to improve and grow.
Your time is the most valuable and scarce resource. Offshore outsourcing gives you access to the experts, so you have more time to focus on actually running your business. It lets you focus on what you do best — building and growing your business. Forget about all the boring, tedious tasks you hate doing — let the pros offshore do it for you at an affordable cost.
Establishing new markets
Setting up an offshore presence may enable a company to expand its customer base to other countries. Foreign employees a lot of the time offer a better understanding of the markets and business risks as well as cultural norms in their country than U.S. employees.
Eliminate Time Barriers
The internet made the standard 9-to-5 hours all but obsolete for many industries, such as retail. When a customer runs into a problem, they want to have it resolved at that very moment, no matter what time of day. Outsourcing your customer service offshore gives your company the advantage of having a professional waiting to help your customers at any time, which results in happier customers. Happier customers turn into repeat customers and great referral sources.
One-Up the Competition
Outsourcing gives companies the added benefit of having dedicated departments without all the extra overhead costs. You could then have more competitive pricing to beat your competition while still having amazing service by skilled, friendly professionals.
There are two other benefits of offshore outsourcing that can’t be ignored:
- Tax Breaks: Several countries offer attractive tax breaks, alternate tax and regulatory benefits, and financial incentives to entice foreign companies to outsource there.
- Expertise: There will be times when you need to complete tasks that require having a particular skill set that you don’t know anything about. Instead of trying to make something work with a prayer and fingers crossed, it’s better to hire an outsourcing team specializing in delivering the service needed. That means you get higher quality done more quickly.
The offshore job market is as rich with talented professionals as in the U.S. — but at much lower prices. There’s an abundance of well-educated, skilled, and experienced professionals. The high competition motivates companies to be skilled in several areas simultaneously, which is a huge help since your one offshore team could tackle a lot of tasks for you.
Strengths and Weaknesses of Popular Countries for Offshore Outsourcing
- Philippines: They have a great fiber-optic infrastructure in nine IT parks. They also have an abundance of English-speaking software engineers, college-educated accountants, architects, customer service agents, graphic artists, and telemarketers, as well as an excellent understanding of the U.S. market.
- India:India has a large and highly qualified English-speaking labor pool. But on the downside, it has high telecommunication costs, and the infrastructure is sometimes unreliable.
- China: If you’re looking to be economical, turn to China. However, much of China has an inadequate command of the English language, although they are improving quickly. Concerns often arise regarding the implementation of intellectual property rights.
- South Africa: South Africa’s strong European influence makes it a popular offshore choice. Many businesses operate in a European time zone. Most people have a strong command of the French language. However, the skill pool is very limited in South Africa.
- Eastern Europe: Eastern Europeans have a strong command of English aas well as German, two of the most widely used languages in business.
Tips For Hiring the Right Offshore Company
You may notice there are differences in company cultures while working with a company located offshore. So you have a good working relationship, you want to make sure the company you work with has similar practices and company culture. If not, it can cause some messy situations and more difficulties in communication. You should be able to have a real down-to-earth conversation with them. I mean, after all, they are part of your team.
Don’t just jump into it with any company. Before you decide to hire an offshore company, check out a few things like the company’s portfolio, customer feedback, and expertise. Tell them the details about your project. Pay attention to how deeply they want to understand your business and its goals. It could also give you a hint at the quality of their services.
The Management Team
Find out as much as possible about who will be leading your offshore team. When you have an experienced management staff leading your offshore team, you can be guaranteed a seamless transition of work and, more importantly, a successful outcome. Check if they have the required experience to fulfill your requirements effectively.
The Service Level Agreement
The SLA (Service Level Agreement) is one of the most crucial documents with an outsourcing partnership. When creating this document, make sure that every detail is written clearly with no room for confusion. This may help you avoid any confusion or uncertainty, especially about the standard of the services you’ll be getting. Basically, it’s what you will be getting from them in writing.
Summing It Up
The future of offshore outsourcing looks bright. It’s a terrific way to find top talent in places you’d never have access to (or could afford) if you simply hired within your local area. Since offshore outsourcing is cost-effective, making it ideal for start-up businesses with limited budgets and large companies looking to cut costs.
A contractor’s expertise added to your company has tremendous worth. Either through expanding production, broadening your marketing, or changing the way your industry does business, offshore outsourcing can provide a chance for you to grow, innovate and rise above the competition.
Our team will fulfill your web development needs and all of your customer support through various channels such as voice, e-mail, live chat, SMS, and social media platforms. See how we can help you use offshore outsourcing to make this even easier and more cost-effective. Contact us today!