WHAT IS OFFSHORE OUTSOURCING?
Offshore outsourcing is the practice of hiring an external organization to perform some business functions in a country other than the one where the products or services are developed or manufactured. It is a form of outsourcing that uses a service provider that is not in the same country and often not on the same continent as the company paying for services. Offshore outsourcing can help businesses reduce costs, access specialized skills, and increase productivity and efficiency.
When to use offshore outsourcing?
Offshore outsourcing can be used for various business functions, such as IT, sales, customer service, accounting, marketing, human resources, and more. Some common examples of offshore outsourcing are:
- Software development: Many companies outsource software development projects to countries like India, China, or Eastern Europe, where there is a large pool of qualified programmers who can deliver high-quality work at lower rates than in-house developers.
- Call center: Many companies outsource their customer service or technical support operations to countries like the Philippines, Mexico, or South Africa, where there are skilled agents who can speak fluent English or other languages and handle customer inquiries efficiently and professionally.
- Data entry: Many companies outsource their data entry tasks to countries like India, Pakistan, or Bangladesh, where there are workers who can perform accurate and fast data entry at a fraction of the cost of domestic workers.
Advantages of offshore outsourcing
Offshore outsourcing can offer many benefits to businesses, such as:
- Cost savings: Offshore outsourcing can help businesses save up to 70% on labor costs, as well as reduce overhead expenses such as office space, equipment, taxes, and benefits. Offshore outsourcing can also help businesses avoid the costs of hiring, training, and retaining in-house staff.
- Quality improvement: Offshore outsourcing can help businesses access a wider talent pool of skilled and experienced workers who can deliver high-quality work that meets or exceeds the expectations of the clients. Offshore outsourcing can also help businesses leverage the best practices and technologies of the service providers.
- Productivity enhancement: Offshore outsourcing can help businesses increase their productivity and efficiency by allowing them to focus on their core competencies and strategic goals. Offshore outsourcing can also help businesses scale up or down their operations according to their needs and demand.
Disadvantages of offshore outsourcing
Offshore outsourcing can also pose some challenges and risks to businesses, such as:
- Communication barriers: Offshore outsourcing can create communication issues due to language differences, cultural differences, time zone differences, and lack of face-to-face interaction. These issues can affect the clarity, accuracy, and timeliness of the communication between the clients and the service providers.
- Quality control: Offshore outsourcing can make it difficult for businesses to monitor and control the quality of the work done by the service providers. There may be variations in the standards, expectations, and regulations of the different countries involved in the offshore outsourcing process.
- Security risks: Offshore outsourcing can expose businesses to security risks such as data breaches, intellectual property theft, or cyberattacks. Businesses need to ensure that they have adequate security measures and policies in place to protect their sensitive information and assets when they outsource them offshore.
Range of prices for offshore outsourcing
The prices for offshore outsourcing vary depending on several factors, such as:
- The type and complexity of the work
- The location and reputation of the service provider
- The skill level and experience of the workers
- The duration and scope of the project
- The quality standards and requirements of the client
According to some estimates, the average hourly rates for offshore outsourcing are:
- Software development: $25-$60
- Call center: $8-$15
- Data entry: $5-$10
Risks of offshore outsourcing
Some of the potential risks of offshore outsourcing are:
- Legal issues: Offshore outsourcing may involve different legal systems and regulations that may affect the contractual agreements, liabilities, disputes, and compliance issues between the clients and the service providers. Businesses need to ensure that they understand and follow the laws and regulations of both their own country and the country where they outsource their work.
- Cultural issues: Offshore outsourcing may involve different cultural norms and values that may affect the work ethics, behaviors, attitudes, and expectations of both the clients and the service providers. Businesses need to ensure that they respect and adapt to the cultural differences and avoid any misunderstandings or conflicts that may arise from them.
- Ethical issues: Offshore outsourcing may raise some ethical concerns regarding the social and environmental impacts of transferring work from one country to another. Businesses need to ensure that they adhere to ethical principles and practices when they outsource their work offshore.
Benefits of offshore outsourcing
Some of the potential benefits of offshore outsourcing are:
- Competitive advantage: Offshore outsourcing can help businesses gain a competitive edge in their market by allowing them to offer better quality, lower prices, faster delivery, or more innovation to their customers. Offshore outsourcing can also help businesses access new markets and opportunities by expanding their global presence and reach.
- Customer satisfaction: Offshore outsourcing can help businesses improve their customer satisfaction by providing them with more responsive, reliable, and customized services. Offshore outsourcing can also help businesses meet the diverse and changing needs and preferences of their customers by offering them more variety, flexibility, and convenience.
- Employee satisfaction: Offshore outsourcing can help businesses improve their employee satisfaction by reducing their workload, stress, and burnout. Offshore outsourcing can also help businesses enhance their employee skills, knowledge, and performance by providing them with more training, feedback, and support.
Examples of successful offshore outsourcing cases
Some of the examples of successful offshore outsourcing cases are:
- Google: Google is one of the leading companies that use offshore outsourcing for various functions, such as software development, data analysis, customer service, and content moderation. Google has outsourced some of its work to countries like India, China, Ireland, Poland, and the Philippines. Google has benefited from offshore outsourcing by reducing its costs, increasing its innovation, and improving its quality.
- Netflix: Netflix is another prominent company that uses offshore outsourcing for its customer service operations. Netflix has outsourced its customer service to countries like the Philippines, Brazil, Mexico, and Japan. Netflix has benefited from offshore outsourcing by enhancing its customer experience, expanding its global reach, and optimizing its resources.
- Slack: Slack is a popular communication platform that uses offshore outsourcing for its software development projects. Slack has outsourced some of its software development to countries like Ukraine, Canada, India, and Australia. Slack has benefited from offshore outsourcing by accessing specialized skills, accelerating its development process, and increasing its productivity.
Outsourcing is always an excellent choice if you have someone keeping in touch with the provider. Remember, you cannot have a baby, disappear, and then come back within 5 years and expect the baby to behave as you wish. Always keep an eye on your project, set up the right KPI to measure the process and provide continuous feedback over the relationship and the outcome you are getting from the outsourced company service.