Many firms view offshoring as a way to save, but cost savings isn’t the main benefit of offshore outsourcing. Today we’ll discuss the true realised benefit of offshore outsourcing—we’re talking about expanded capacity.
Expanded Capacity: The greatest realised benefit of offshoring
In the 2019 Small Business BPO Survey conducted by Clutch, the top five reasons small people outsource business processes have nothing to do with reducing costs. Four out of the top five reasons are related to expanding capacity: increasing efficiency (24%), increasing available expertise (18%), freeing up employees’ time for other tasks (15%) and increasing available resources (12%). This goes to show that businesses use Business Process Outsourcing (BPO) to free up time, expertise, and resources so they can focus on scaling up and improving their services and offerings.
For example, let’s look at the accounting industry. Bond University came out with a research last year titled Offshoring of Accounting Services in Australia (Offshoring Research). The study, which looks at the current trends in offshoring specifically in the accounting industry, talks about expanded capacity as one of the key benefits of offshoring.
“One of the key benefits of offshoring of menial tasks, and this also applies to AI tools, is that SME accounting firms can shift their business mix from compliance type activities to including more business services. Providing higher end and arguably more interesting accounting services is a positive outcome for the onshore accounting team, the clients, and the partners.”
In simpler terms, the Offshoring Research shows that the greatest realised benefit of offshoring is being able to provide higher value and more consultative work. For some accountants, this means taking on the role of an outsourced CFO for clients. In their interviews, the researchers found that offshoring firms are often explaining to their peers how offshoring has added value to them, their businesses, and their clients’ businesses.
The Offshoring Research also dispels the belief that offshoring takes away local jobs. Contrary to the perception of firms not engaging in the practise, offshoring has allowed many SME accounting firms to grow. As a result, they’re employing more, not fewer, local accountants.
This also applies to other industries—not just accounting. In the article “Offshoring and the migration of jobs” by Gianmarco Ottaviano from the University of Bologna, he dispels the narrative that offshoring displaces local workers by providing cheap alternative sources of labour. Instead, he says the foreign market access and lower production costs allow domestic firms to increase their efficiency and expand production. This in turn creates new jobs that allow the domestic labour force to upgrade their tasks.
Cost savings are an enabler, not merely a reason
What we learn from the Offshoring Research is that while cost savings ranks as the second major benefit of offshoring, it is more of an enabler for expansion and not just a mere benefit. It makes offshoring a viable way to expand capacity, improve service levels, solve domestic skills shortages, and gain access to highly trained personnel.
Another study, “Accessing offshoring advantages: what and how to offshore,” reveals that companies with offshoring experience are more likely to lean towards more knowledge and innovation seeking. Offshoring can help companies discover and apply new strategies, broaden the range of possibilities when making offshoring decisions, and eventually enrich their existing knowledge and technology. Only the companies who offshore simpler, less technical tasks do so to access low-cost labour.
Improved service levels and high-quality work
Here’s another thing that the Offshoring Research reveals: firms that don’t offshore perceive the quality of offshore work to be quite low. 45% of non-offshoring firms said this was a reason why they wouldn’t consider offshoring. On the other hand, those who are offshoring said improved service levels are the third major benefit of offshoring, and of the following tasks offshored, most rated at 75% and more:
These survey results show that the reality is much brighter than the grim perception of non-offshoring firms. Interviewee 2 puts good outcomes down to providing good direction:
“The quality of our offshore staff is great, and they tend to work best with clear direction, so anything we throw at them that is structured like individual tax they do just as well if not better than our in-house training staff.”
This also highlighted in the “Accessing offshore advantages” study. Offshoring companies that succeed in delivering excellent performance and minimising interruptions are ones that provide clear directions in the form of codification and specification of procedures. They are also good at decoupling offshored activities from onshore tasks.
With proper planning, clear directions and trust in the offshoring process, businesses can expand their capacity, widen their knowledge base, and improve their performance—the lower costs only come as a bonus.
An Australian Business Process Offshoring (BPO) organisation focused on supporting small to medium businesses, Staff Domain, Inc. is committed to helping its partners overseas achieve cost savings and rapid growth through end-to-end offshore recruitment and operational management.
Based in Pasig City, Metro Manila, Philippines, Staff Domain outsource teams feature the best talent who take pride in the work and the professional choices they make. The company’s State of the Art Facility exceeds the expectations of working professionals and ensures productivity- a space where smart professionals and businesses can grow together.
Considering offshoring for your business? Visit Staff Domain to get learn more and get started.