Offshoring is becoming a popular trend among companies as they look to cut costs and increase efficiency. By outsourcing certain functions, such as customer service or software development, to remote workers in other countries, companies can take advantage of lower labor costs and access a wider pool of talent.
This business strategy also allows companies to reduce their overhead costs by eliminating the need for physical office space. Additionally, it can be beneficial for businesses that need specialized skillsets or expertise that may not be available locally. Virtual staffing solutions such as virtual assistants and offshore outsourcing can help businesses save time and money while still allowing them to access the best talent available.
A lot of multinational corporations from the West outsource their commercial operations, particularly to Asia-Pacific nations like the Philippines, China, and India. Typical examples of these commercial operations are software development, manufacturing, and customer support.
What is offshore outsourcing?
Offshoring is the strategy of moving some of a company’s core operations and activities abroad, or away from its home nation.
It entails contracting with workers in other nations to do certain tasks (such as accounting, administration, customer service, manufacturing operations, and IT services). The relocation of a company’s complete activity to an offshore site in order to benefit from low-cost labor or tax benefits is more significant.
Additionally, by performing some processes in separate time zones, outsourcing frequently enables European and American businesses to increase their job turnaround time. You can reach out to your overseas workers to address problems or advance work even when your domestic workers are not available, minimizing downtime.
Let’s assume that your business has a Swedish headquarters and a Philippine outsourcing hub. Your employees will have different working hours in Sweden and the Philippines because of the difference in time zones. The Philippines is typically six hours ahead of Sweden.
So you can contact your offshore workers in the Philippines if an IT emergency occurs after midnight in Sweden. By doing so, you may shorten wait times and avoid any interruptions to business operations.
Two categories of offshoring:
Product offshoring is the practice of having your goods made abroad and imported for domestic consumption.
Services offshoring occurs when a product is made in the country of origin, but ancillary services, such as customer service, telecommunications, human resources, etc., are outsourced to another nation.
Offshore outsourcing is now a common business technique that enables businesses to take advantage of the reduced cost of labor and find unexplored markets.
For as long as it has been feasible, there has been global outsourcing. However, this area has seen a sharp surge recently. This is due to businesses increasingly finding conducting business abroad more efficient than doing it domestically.
We’ll go over the main justifications for offshore business activities in this article.
Reasons why companies are outsourcing offshore:
Cost-Effective and Efficient Production: Organizations want to conduct business in a way that reduces the costs associated with producing the same amount of goods domestically. Their primary reasons for growing their business and making investments in new places are to benefit from less expensive production inputs.
Low labor costs, readily accessible raw materials and natural resources, technical advancements, and informational services are just a few of these aspects. Although some of the key forces behind offshoring are cheap salaries, a skilled and educated labor force, and low labor costs, the purchasing power of the particular market also plays a role.
Ideal Market and Growth Prospects: The host company’s infrastructure development, taxation policies, and political stability are some of the key elements taken into account before making a final decision. Additionally, the degree of trade freedom enjoyed by the host nation will be decisive.
Organizations frequently favor nations with more open trade policies. For instance, the majority of businesses are expanding into China to benefit from the country’s growing population. Brazil, Mexico, and Indonesia have seen an increase in Direct Foreign Investment (FDI) inflows as a result of their abundant natural resources, sizable markets, and reasonably expanding economies. The Philippines has been recognized as the call center capital of the world with its unparalleled customer support skills and English language proficiency.
Legal Structure: International offshoring is often attracted by a nation’s legal system. The majority of nations have passed a variety of laws solely to draw in foreign investment. The Special Economic Zones created by these host or vendor countries is one example. In order to benefit from the growth of outsourcing, the governments of these nations launched measures to entice foreign investors to their nations. To entice FDI, the majority of nations also provide tax advantages, increased privatization, decreased customs taxes, decreased utility bills, and simplified administrative processes.
Before you think about outsourcing any company function, you should examine the following steps:
- Identify the parts of your organization’s current business process that need specialized knowledge or help that can be outsourced.
- Outline the advantages and drawbacks of moving any operation overseas.
- Create a strategy for your outsourcing effort.
- In order to prepare your staff to handle new problems in the corporate environment, communicate the plan to them and provide them with training.
- Create a backup plan to address any potential hazards, such as a loss of quality control, unanticipated expenses of outsourcing to foreign countries, data security, etc.
- Continually assess if the offshore project is fulfilling the objectives of the company.
Key Take Aways
Offshore outsourcing enables you to grow your business with a highly qualified staff, target new clients, pay less for labor, and ultimately boost your profit margin. It’s favorable for businesses in the manufacturing industry as well as for those in contact centers, e-commerce, and other sectors. It helps you expand any business function by bringing on staff with specialized knowledge in particular fields.
Before working with any offshore outsourcing provider, you must take into account your goals, growth strategy, and other business requirements. Elite Virtual Staff understands first-hand the demands of a revolutionary business strategy. We want you to grow your business confidently knowing you have the advantage of cost-efficient virtual staffing solutions tailor-suited to the needs of your company. Call us today and we’ll guide you through our valued expertise in this field.