What are the Advantages of Offshore Outsourcing?

Last Updated
March 8, 2024
What are the Advantages of Offshore Outsourcing?

Offshore outsourcing is a common practice that many companies undertake today. It mainly involves hiring an external vendor that provides services, staff, infrastructure, etc. in exchange for a fee. There are various types of outsourcing like in-shoring, nearshoring, and offshoring.

Offshoring is by far the most common outsourcing model, which can help a company save on costs. The value of the outsourcing sector is expected to grow by $75.89 trillion between 2023 and 2027 at a CAGR of 6.5%. 

It is the most common service in the fields of software development, finance, billing, human resource management, and back office services. Before, we directly get down to the advantages that outsourcing offers, or for that matter, regarding outsourcing, you must understand what outsourcing and offshore outsourcing are. 

Decoding Offshore Outsourcing 

Offshore outsourcing is the most standard form of outsourcing that companies go for. It helps companies tap into a ready pool of candidates, in a different country. Mostly, the distance between both countries is quite a lot. 

This strategy helps in getting the desired services at a lower cost. It also allows businesses to streamline their operations, by delegating the more mundane tasks to external vendors and focusing more on important tasks that are private and confidential. Most developing countries have friendly policies and relaxed norms for the companies that outsource the job. This, in turn, helps in improving the economy. 

Thus, you can very well understand the myriad advantages that offshore outsourcing can offer. 

Advantages of Offshore Outsourcing 

Deciding whether or not to outsource is firstly a very crucial decision for any company. There are numerous reasons why many businesses across the globe choose to outsource. Before you decide on offshore outsourcing, it is crucial for you to differentiate it from other modes of outsourcing. Additionally, you have to know what kind of outsourcing will suit you, so as to reap the maximum benefits. 

In this context, the main difference between offshore outsourcing onshore outsourcing, and nearshore outsourcing is the location. In the former, it involves partnering with a distant country. Whereas, in the case of the latter two, the task is delegated to nearby countries or the same country. 

Some of the advantages that you can get hold of are listed below. 

Cost Reduction 

This is the first advantage that most companies look for. Most developing nations across the globe need to create jobs for their population. This also helps in improving the economy. The governments of the developing nations often have relaxed rules and regulations. This helps them to lure the companies into delegating the desired tasks. The cost of developing countries' living costs and index often dictates the choice of location for the outsourcing company. 

Skilled Pool Of Staff 

You can get access to a ready pool of skilled candidates, with expertise in various departments. It can be quite costly to hire staff each time there is a new project. Moreover, training costs are also quite high today. By outsourcing, companies can save on recruitment and training costs. However, the benefits are huge. By roping in another external vendor, it is possible to get the best staff with the requisite skills for a specific project. 

Access To Global Pool Of Candidates 

In today’s age, globalization is the key to expansion in every realm of business. It also gives a wide assortment of exposure to the company as well as the hired firm’s employees. By offshore outsourcing, you are globalizing the entire work environment and utilizing the culture of various places. 

Leverage The Power Of Modern Technology 

Apart from getting access to a global workforce, you can also gain access to technology, which can be otherwise costly to get in your own region. Moreover, if you do not have the necessary technological expertise or finances, you can easily outsource the task, to get it done at a lower cost, but with great technological compliance. 

State-Of-The Art Facility 

You get to access world-class facilities, when you go for offshore outsourcing. Developing nations like India and Philippines, are by no means any less than US or UK. You will find the government investing heavily in the set-up of business zones. It helps to attract foreign investors in dozens. Most outsourcing companies today in places like Southeast Asia, operate with modern facilities to meet their client’s requirements.

Flexibility In Business 

If you outsource, you get various types of benefits. But the main aspect is flexibility. It does save time, helps you to access resources, and also allows you to tap into expertise. It helps in the growth of your business. The business arena can be very dynamic, so if you invest in a certain infrastructure and then it becomes obsolete, it can be a loss. However, when you delegate the work to any other company, you are actually doing it in the present. As the outsourcing company already has the infrastructure, it does not really matter for the others. You may use it for some time, and then wind up when the need gets fulfilled. 

Helps With Scaling 

This is another aspect of business, which you should look at. As a company, you may be aiming to grow at every opportunity. If you start doing things in-house, it can get slow at one point in time. You may run out of finances, or you may lack the ability to invest in new resources quickly. However, if you go for offshore outsourcing, then you can expand and downsize at any time. There is no need to hire or fire, in urgency. 

24/7 Availability

Today, customers want to be answered and to be heard, according to their time availability. By outsourcing the tasks, you can be omnipresent. Working with different time zones allows you to give services at times that are outside your own country’s work window. This way, it is possible to provide customer service outside of business hours. Moreover, most outsourcing companies work 24x7. 

Better Efficiency 

You can access better expertise in the case of offshore outsourcing, which eventually gives you increased efficiency. It also allows you to streamline the business processes. When you free up resources internally and concentrate on more important tasks, it can increase your company’s efficiency. Thus, offshore sourcing is a very important strategy for an ever-changing business world. 

Great Service 

Apart from efficiency, you are likely going to get great service, if you research well. Picking up the right partner is extremely important in this case, as the wrong choice of vendor can destroy your plans for success. 

Higher Customer Satisfaction 

Today’s customers are more literate and know more than you expect them to know. So, you will find them to be more critical. They have higher expectations than earlier. When you tap into an experienced workforce, you can serve your customers in a better manner. Customer satisfaction is the most critical metric that you can lay your hands on for success. CSAT scores come into the picture at every stage of the customer service process. Moreover, it also leads to loyalty and retention. 

Higher Profitability 

Every business is in the market today, to make profits. When you outsource highly expertise-oriented tasks and repetitive tasks to other country staff members, you take leverage of increased gains. The right offshore service provider can help you gain huge returns. They can help you to reduce your operational expenses, and also increase sales. Thus, it ensures a good cash flow throughout. 

Focus On Core Competencies 

If you choose the right outsourcing company, you can focus on tasks that are more important. You can delegate the non-core functions to offshore countries. In turn, you can concentrate on more strategic tasks in your organization. 

Stay Globally Competitive 

Global competitiveness is the foundation of any business today. Businesses need to have a global presence today. As it can give you a competitive advantage. 

Business Sustainability 

Your business is successful, in the true sense of the word, when you are sustainable in the long run. If you make profits for a few years and then go bankrupt, there is no point. Offshoring allows you to collaborate with firms from across the globe. It also gives you extra expertise at hand, to experiment. So, you can go on in a hugely competitive world, as well. 

Business Expansion 

As an entrepreneur, nothing can be as satisfying as growing your business figures. For that, you need to keep a check on your expenses, hire the right people, and incorporate the best processes. Offshoring the answer to all such needs. 

Cons Of Offshore Outsourcing 

  • Communication Gap – When you offshore outsourcing, the language of the company or staff will be different, and so will their work culture. So, it can create communication gaps. The gap can bring in extra gaps. 
  • Quality Control – Controlling the deliverables quality can also be a huge task. If the briefing has not been on point, there may be issues at the outsourcing company’s end. It can be taxing for your business. 
  • Time Zone Difference – Another huge challenge is the difference in time zone. You may not be able to have meetings, as much as required. When your team starts working, the other team may be off their roster. However, you can counter this challenge by offshoring to countries with less time zone difference. 
  • Loss of Control – The discipline and expertise of the outsourced team is crucial here. The outsourced team’s culture may also create obstacles. So, choosing a reputed team for the task can help you to mitigate the challenge. 

Best Practices For Offshore Outsourcing

  • Have a reliable system in place for your own company and also for the outsourced team. And for that, you continuously need to assess your company’s system and processes. You have to be on the same page as the outsourced team. 
  • Research potential partners before signing on the dotted line. You have to choose a partner, whose goals and yours sync. 
  • Look for offshore partners who can communicate well. Moreover, discuss all the deliverables in the beginning, so that there are no nasty surprises later on. Establishing a certain level of commitment is crucial. 
  • Track performance and progress from Day 1. If you do this, then you are in control of the situation. 
  • Optimize the outsourcing operation, as it will help you to conduct audits regularly. Adjust KPIs, modify SLAs, and offer training, whenever and wherever necessary. 

Finally…

Thus, now you have a fair idea of the advantages of offshore outsourcing, Take leverage of the same, and maximize your returns. Moreover, you should always weigh the pluses and minuses before starting the job. It will help you to gain in terms of most business aspects.