Offshore outsourcing definition What is offshore outsourcing?
Offshore outsourcing refers to the practice of transferring some functions of your business to a company in a different geographic location, particularly offshore destinations like the Philippines, India, and Malaysia. Organizations usually do this strategy to access a wider talent pool at a low overhead cost without sacrificing the quality of work done.
Offshore outsourcing helps strengthen a business’s performance and compete with other organizations in the industry. To do this, companies partner with established and trusted outsourcing services providers to ensure high work quality and accountability.
Partnering with a trusted BPO provider assures organizations the following: Employees that underwent a thorough interview process to ensure suitability for the needed role
Workers going through proper onboarding, training, and upskilling sessions
Satisfied employees, since they will be provided with high-quality equipment and a Class A physical office
Accountable and manageable upper management
Clear targets and KPIs for the offshore team
Efficient processes and standard operating procedures
Legalities and other documentation to be well taken care of, among others
Further, offshore employees can help manage essential business operation tasks, which means you and your in-house employees have more time to focus on your own responsibilities. This boosts focus, productivity, and employee fulfillment -- all while the company saves up to 70% on labor costs!
This article aims to provide a comprehensive understanding of what offshore outsourcing means and provide examples of its many benefits. We will also discuss the history of offshore outsourcing, learn why businesses resort to offshore staffing, discover its pros and cons, as well as learn the types of offshore staffing. Offshore outsourcing definition
Offshore outsourcing, also referred to as business process outsourcing (BPO), is the process of having work done for your business using qualified staffing solutions from countries with lower labor costs.
Commonly, IT, sales, and administrative roles are carried out for businesses across the world from countries such as the Philippines and India.
Companies can benefit from accessing other countries that have more resources for people with specialized skills. At the same time, they get quality work at a fraction of the costs.
Like nearshore outsourcing, companies prefer having minor tasks outsourced to a service provider so that the in-house team could focus on the core business functions. One perk of offshore outsourcing for businesses is that they do not need to think about the overhead expenses when they hire domestically.
Overall, the company could benefit from lower human resources costs, equal or higher-quality outputs, and higher profits. About offshore outsourcing Offshoring history Benefits of offshore staffing Why businesses resort to offshore outsourcing Offshore outsourcing examples Services you can outsource Offshore outsourcing pros and cons Pros of offshore outsourcing Cons of offshore outsourcing Offshore outsourcing in the Philippines Types of offshore outsourcing Offshoring history
Deploying manufacturing jobs out of the country has been a common business method since the 1960s.
This well-known business strategy started with outsourcing. Outsourcing is when an organization farms out parts of their business processes to an external company. While it may seem as a current phenomenon to many, the truth is, it has been going on since the 1950s.
However, it wasn’t until the 1980s that corporations perceived it as an effective business strategy. It was also in that year where companies mainly outsource to allow them to have greater focus on their core competencies.
Then in the 1990s up to the early 2000s, organizations started to concentrate more on the cost-saving measures of outsourcing. Now, this is the time where strategic outsourcing has emerged and the goal is to gain a competitive advantage in the market industry.
Fast forward through time, given today’s technological advancements, it is easier for companies to delegate both their core and non-core functions to external workforce in different countries.
Offshoring revolutionizes organizations and how they perform their daily operations.
It transforms business landscapes into agile structures that boosts its overall profitability. Benefits of offshore outsourcing
The world is becoming increasingly globalized. Technology, software, and communications improvements now enable easy access to a globalized workforce. This has many advantages, but the primary benefits of offshore staffing are that: You can significantly cut costs (typically saving 60%-80%)
Access large pools of highly qualified and highly capable staff
Source staff from across the globe instead of being limited by the local population
The benefits of offshore staffing impact small, medium, and large enterprises across the globe. These businesses can access more affordable resources to help streamline and grow their business. This is a win-win for all parties involved. Why do businesses resort to offshore outsourcing?
Companies do not just switch to offshore outsourcing due to its cost-effectiveness. Rather, more and more companies these days are acknowledging the other relevant advantages of offshore outsourcing to the market: To save up to 70% on labor costs. Businesses always have to look for ways they can obtain a stable stream of revenue while sustaining their daily operations. However, because of the economic fluctuations and its unpredictability, other companies couldn’t afford the costs of local operations. This is where offshore outsourcing can come into handy.
To stand out in a sea of tight competitors. Another reason for offshoring is to stay competitive, especially with the global economy. Like for example with customer service, businesses are able to boost their efficiency and daily operational procedures with this strategic practice.
To keep up with the latest business trends. Entrepreneurs in this day and age know well enough that innovation is one key factor in their overall success. Thus, it is more achievable with offshoring.
To leverage professional and highly competent offshore staff. Other companies also resort to offshoring as a result of the lack of qualified local workers to do specific tasks. Countries like Australia experience skill shortages in the automotive industry. Same as with the United States when Apple had to transfer its manufacturing to China due to the lack of local labor force. Offshore outsourcing examples
Businesses of all sizes rely on offshore outsourcing to delegate tasks to lower-cost countries but of equal expertise. Just like nearshore outsourcing, companies prefer having several roles outsourced so that the in-house team can focus on the vital functions of the business.
Here are some of the most popular offshore outsourcing examples: Customer service departments through outsourced call centers
One popular example of offshore outsourcing is customer service through call center companies. Every company needs a customer service department to cater to customers' needs, but these operations can get very pricey.
As a business grows, more people are needed to handle queries and maintain customer satisfaction. Having an in-house customer service team may not be the best decision.
From coming up with standard operation procedures to staff and management training, running a customer service department alone can take so much time, effort, and not to mention resources.
This is why offshore outsourcing of customer service roles and departments has become the norm Virtual assistants
Almost anything can be done online.
Need to book personal appointments or work meetings? It can be done online.
Need to delegate social media posting and graphic design activities? Do it virtually.
Need to develop codes for your website and/or mobile app? Outsource it online.
Almost everything can be done online, so business owners and companies offshore outsource tasks to general Virtual Assistants (VAs).
Offshore outsourcing tasks to general VAs has been a major game-changer, especially for small businesses. This is because outsourced staff ensure quality work while saving a lot of resources. What services can you offshore?
Aside from manufacturing, organizations these days are able to farm out both their core and non-core functions to offshore providers.
One example of this is foreign companies that have been offshoring their call center in the Philippines. We all know that the country is known as the Business Process Outsourcing (BPO) capital of the globe, and is well known for call center services.
However, aside from customer service and support, Information technology (IT), related job functions are also some of the leading offshored services. In fact, according to statistics, the global IT outsourcing market is expected to be worth $98 billion from 2020 to 2024.
A lot of foreign companies have also tapped into offshoring their human resources tasks such as sourcing, hiring process, and more. More so, finance and accounting-related tasks like bookkeeping, tax filing, procurement processes, etc.
In terms of sales and marketing, offshore outsourcing companies like Six Eleven BPO offer global strategic solutions for different types of industry sectors.
Part of their services may include, lead generation campaigns, industry and market research, and search engine optimization, among others.
Basically, companies can offshore nearly every part of their daily business functions to offshoring providers from around the world. This has been made even possible with the help of our modern-day’s technology and the availability of the internet. Pros and cons of offshoring
Naturally, offshoring will always have its mix of advantages and disadvantages. Having said that, let’s see whether the benefits of offshoring outweigh its downsides: Offshoring pros Reduced labor costs
One good example of this is US companies that offshore to developing countries like the Philippines.
This allows them to reduce their overhead costs as Filipino workers have low compensation as compared to them hiring local in-house employees. The availability of a skilled workforce
As we have mentioned earlier, one of the reasons why organizations offshore is the lack of skilled labor. Offshoring to countries like the Philippines and India grants international companies access to a skilled talent pool.
Both these countries have seasoned global talents that are English proficient and college degree holders. 24/7 operations
Foreign companies that offshore to another country with major time differences allow them to have their daily operations overextended hours. Like in most cases customer services, these foreign companies are able to extend their contact center services even up to twenty-four hours. Increased focus on the business core
As businesses free up more on their job loads, this gives more time for leaders and in-house staff to focus on improving their core functions.
You can rely on a trusted outsourcing partner like HireSmart Staff to build a highly-skilled team to perform other tasks needed in your company.
It is also important to note that organizations that offshore are not just on the receiving end of this practice’s perks. In terms of the Philippines, the BPO industry in the country plays a huge role in terms of its economic growth.
The country’s BPO industry employs a lot of the working population in the Philippines. Offshoring cons Language barriers
This is perhaps one of the major drawbacks in offshoring. Usually in countries like India and China, English language isn’t the locals’ first language.
Another factor is when the offshoring provider comes from a region with a strong local accent. Cultural differences
When offshoring to different countries, cultural and social differences are unavoidable.
For example, US business leaders may talk in a straightforward and candid manner, while a Filipino remote staff may be more reserved. Quality control
Another concern for foreign companies is that offshoring also means that they will be giving up control over their offshored tasks.
Even if these clients provide quality guidelines, there will still be differences in terms of the working culture and environment.
Despite these cons, businesses still consider offshoring as a good business model to organizations of all shapes and sizes. Going back to offshoring to the Philippines, the country has ranked second among Asian countries with the highest English speaking population.
More so, the country is also heavily influenced by the Western culture as it has been colonized by the US and Spain for years. Offshore outsourcing in the Philippines
The Philippines is the leading offshore outsourcing destination in the world. With 1.3 million BPO workers and counting, large corporations and even small to medium-sized enterprises all over the world trust that their Filipino workers and remote teams can provide excellent outputs, customer service, or IT assistance at a cost-effective price.
Outsource Accelerator provides you with the best customer service outsourcing companies in the Philippines, where you can save up to 70% on staffing costs. We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2500+ BPOs… all designed to make it easier for clients to learn about, and engage with, outsourcing. Types of offshore outsourcing
Here are some types of offshore outsourcing, as listed by Rezaid:
There are many popular approaches and solutions that are used by businesses today – each with its own benefits and drawbacks. The right offshore outsourcing type will depend on your specific requirements as well as the nature of your project.
Here are four different types of offshore outsourcing: Production offshoring
The actual movement of the physical manufacturing process overseas, generally at a significantly cheaper cost in terms of personnel and materials, is known as production offshoring.
Front-office and back-office processes and functions are the two primary types of offshored processes and functions. Customer service, inbound and outbound telemarketing, virtual assistants, and technical assistance are all examples of offshore.
HR and recruiting, accounting and bookkeeping, mobile and web development, and design and graphics are other examples of production offshoring. System services offshoring
Information technology (IT) will be a key subject to get right given the multiplicity of procedures and minute-by-minute activities of any corporate operation.
In the 1990s, a huge amount of communication infrastructure allowed nations like India, which has a big pool of English speakers and a technically skilled workforce, to lead the sector by luring companies like HP, IBM, Microsoft, Oracle Corporation, Intel, and Cisco. Innovation and software offshoring
In computer science and software development services, Asian countries lead the world. High-tech product companies, including those in Silicon Valley, have begun to offshore innovation work to Colombia, Belarus, South Africa, Mexico, and Ukraine.
Using these countries’ highly trained labor pools results in considerable cost savings and faster production cycles. Reshoring
Reshoring, also known as back shoring or inshoring, is the opposite of offshoring. Companies like Google, Facebook, and Amazon have been criticized in Europe for allegedly concealing income and avoiding taxes. They reportedly did this by booking non-US earnings from major advertisers through its Dublin branch in low-tax havens like the Republic of Ireland.
As a result, it started in January 2018 that it would book those earnings and pay the taxes on those profits in the countries where they were generated.
Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!
What is What is business process outsourcing? What is Business Process Outsourcing BPO?
Business Process Outsourcing (BPO) is the delegation of business processes to an external service provider to a nearby or farther location. BPO uses various technology-enabled services to optimize the delivery of services.
Some of the usual outsourced business functions are the following. Payroll
In the case of content providers, these could mean hiring writers, remote editors, or virtual assistants.
BPO speeds up processes and enhances efficiency. Companies that outsource some of their business processes use their time on core services and competencies.
With this shift in focus, companies improve their current processes which may result in improved customer satisfaction. BPO helps companies divert their resources to more critical business strategies.
Often, companies find it impractical to hire a full-time position in-house because of the cost associated with doing so. Outsourcing services can also help them save costs and resources in hiring suitable employees. How does Business Process Outsourcing work?
Business process outsourcing happens when a business taps a third-party service provider to operate some of its internal processes. Such ‘processes’ include customer service, accounting and finance, or sales.
It is different from hiring an agency to do specific tasks, as the outsourcing provider (BPO) is more concerned with the ongoing production of labour-intensive tasks, instead of the higher-level strategy and guidance.
Now, business process outsourcing has broadened and is more akin to staff augmentation, or staff leasing. What are the benefits of business process outsourcing?
There are many benefits to outsourcing, as well as some downsides and risks. The common benefits include: Cost savings
Companies can enjoy savings of up to 70% by leveraging the salaries and costs in countries such as the Philippines and India. Global market
Businesses get to access a bigger pool of talent that can fit their requirements. They can have better options in hiring employees since they are not limited to what is available in their home countries. Global presence
At the same time, business process outsourcing opens clients to global trade opportunities. They can establish their global presence and expand more easily to other locations since they already have operations in the area. Flexible workforce
BPO reduces internal local compliance obligations including providing additional office spaces to employees. Instead, organizations can hold their business operations on a remote setup, most usually having their teams in an office provided by the BPO firm. Leverage skill
Companies cannot always do everything on their own. BPO enables them to leverage the skills of other specialist companies on more complex tasks such as accounting and IT. Focus
Lastly, BPO enables organizations to focus on their core business functions. This is since most of their non-core business operations are done with the help of a reliable service provider. Business process outsourcing examples
The business process outsourcing sector is a vast industry, generating over $200bn annually, and employing millions of people worldwide.
BPO can be seen in different forms and contexts, from hiring single staff to getting an offshore team. Some examples of BPO include: Big enterprise
Facebook and Uber outsource many of their operational functions, including content moderation for Facebook, and customer service for Uber Medium-size businesses
A medium business with 50-500 staff might outsource the labour-intensive accounting and finance functions to a team in the Philippines. Small business and entrepreneur
It is common for small business owners to have a Virtual Assistant (VA) working for them full time and remotely from the Philippines. What are the different types of BPO?
The type of business process outsourcing can be characterised by their specialisation, location, and size. Generalist or specialist BPOs
Business process outsourcing is in the human resources and professional services sector. However, their services extend across all industries. The majority of BPOs are generalists, in that they offer a full range of professional services.
Meanwhile, some specialise in certain verticals such as the following. Legal process outsourcing
Legal process outsourcing deals more with delegating legal processes and compliances to legal firms in another area.
Knowledge process outsourcing
Meanwhile, knowledge process outsourcing enables companies to outsource knowledge-related work including research and development, innovation, and creatives. Location
Business process outsourcing typically operates from developing nations such as the Philippines, India, and Colombia. They typically have cheaper cost-of-living and bigger populations. Different locations offer different advantages. Size of BPO
The bigger BPOs employ more than 250,000 people. They are huge, global operations. Medium-sized BPOs range from 500-5,000 staff and offer a full range of services. The smaller BPOs might have 1-500 people. Functions of business process outsourcing
Collectively, business process outsourcing provides any kind of staffing solution. Common functions of BPO include: Finance and accounting
Outsourced finance and accounting services help businesses manage their books, monitor cash flow, and keep up with corporate income tax compliances without fuss. Healthcare
Healthcare outsourcing, meanwhile, organizes various back- and front-end functions done for the healthcare and insurance industries. Creative and content
Creative services outsourcing covers everything from post-production of Hollywood movies to newspaper and website content. Tech, IT and development
IT outsourcing involves delegating network management, web and app development, and cybersecurity protection to IT firms in different countries. Sales & customer support
Some BPO providers specialize in sales and customer support for pre- and post-sales transactions. This helps companies meet the expectations and demands of their customers, keeping them satisfied even after their purchase. Marketing
BPOs and marketing firms can help in ongoing marketing, communication and branding activities for their clients. This helps them attract more suitable leads in a cost-efficient way. Talent and HR
Businesses can delegate HR, recruitment and compliance to professional employer organizations to maximize recruitment and workforce management. Administration
Generalist BPOs help organizations accomplish general business administration and operational activities. This includes data entry, appointment setting, and other related functions. Supply chain management
Lastly, e-commerce stores benefit from outsourcing supply chain management to manage warehouse and delivery processes. Top BPO companies in the world’s top outsourcing hubs
A wide range of business process outsourcing companies in different parts of the world provide utmost services to their Western and local clients. Many of them even earned recognition by award-giving bodies due to their performance in both their roles and their level of care for the employees.
Check out the top BPO companies in several outsourcing destinations below. Top BPO companies in the Philippines Top Indian BPO companies Top South African BPO companies Business Process Outsourcing (BPO) services
With the rise of new offshore outsourcing locations, companies can have better options in terms of location and services they can delegate. However, finding a suitable BPO company can be a daunting task to be done on their own.
Good thing advisory services such as Outsource Accelerator is there to help them.
Outsource Accelerator is the most trusted source for independent information & advisory for Business Process Outsourcing (BPO). We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,500+ BPOs from different locations.
Outsource Accelerator's offerings make it easier for clients to learn about, and engage with, business process outsourcing companies worldwide.
Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!