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Offshore Outsourcing

Definition

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.

About offshore outsourcing

  1. Offshore outsourcing definition
  2. About offshore outsourcing
  3. Benefits of offshore staffing
  4. Offshore outsourcing examples
  5. Offshore vs onshore outsourcing
  6. Offshore outsourcing pros and cons
    1. Pros of offshore outsourcing
    2. Cons of offshore outsourcing
  7. Offshore outsourcing Philippines
  8. Types of offshore outsourcing 

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. One popular example of offshore outsourcing is customer service through call center companies. These BPO companies offer quality customer service at a much cheaper rate than hiring locally.

Like nearshore outsourcing, companies prefer having minor tasks outsourced so that the in-house team could focus on the vital functions of the business. One perk of offshore outsourcing for businesses is that they do not need to think about the overhead expenses for the benefits of additional in-house employees.

Overall, the company could benefit from lower human resources costs, equal or higher-quality outputs, and higher profits.

Benefits of offshore staffing

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 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.

Offshore outsourcing examples

Companies turn to offshore outsourcing for cheaper wages and better quality work. Just like nearshore outsourcing, companies prefer having minor tasks outsourced so that the in-house team could focus on the vital functions of the business. 

One popular example of offshore outsourcing is customer service through call center companies. These BPO companies offer quality customer service at a much cheaper rate than hiring locally.

Offshore vs onshore outsourcing

The opposite of offshore outsourcing is onshore outsourcing, which is the practice of outsourcing your business functions and non-core teams to a BPO firm in the same country where the business operates. It is also commonly referred to as “domestic outsourcing.”

Unlike offshore outsourcing, the business does not save as much on employment costs – which is the main reason why businesses turn to outsourcing in the first place. 

Since the outsourcing provider is in the same country, both companies will have the same cost of living and labor laws applied. However, with onshore outsourcing, you wouldn’t have to deal with cultural and time-zone differences.

Business Process Outsourcing (BPO)
Business Process Outsourcing (BPO)

Offshore outsourcing pros and cons

Companies can turn to offshore outsourcing for almost every business role – whether they’re in need of customer service teams, virtual assistants, bookkeepers, graphic designers, IT consultants, and more.

Further, before diving into the world of offshore outsourcing, it’s best to be informed of its pros and cons.

Pros of offshore outsourcing

  • Substantial savings
  • Access to a flexible, diverse, versatile, and proficient offshore team
  • Experienced and competent team leaders will guide your remote team
  • Diminished cost and less legal responsibilities (because your outsourcing provider will take care of everything)

Cons of offshore outsourcing

  • Occasional delivery delays
  • Time zone and cultural barriers
  • Possible disclosure of confidential information

Offshore outsourcing 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:

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.

Qeries related to offshore outsourcing

How do you determine if you should outsource?

Outsourcing has its disadvantages (time zone and cultural differences, possible disclosure of confidential data), but more importantly, it has lots of advantages (massive employment savings, minimal supervision, proficient and experienced employees and team leaders).

Companies should have a deep and thorough analysis of their business. Take the pros and cons, think of a plan on how to apply it to the business, and analyze if the pros of outsourcing outweigh the cons. If you think outsourcing will help your team more efficient and can help you save on employment costs in the long run, then it’s time to take a shot.

What is the difference between outsourcing and offshore outsourcing?

Outsourcing is the business practice and more general term of hiring a third-party provider to perform tasks and functions that were normally done in-house. Usually, companies outsource to save up on labor costs, and so their core team can focus on their more vital responsibilities.

You can either outsource onshore or offshore, and offshore outsourcing is an area of outsourcing. Offshore outsourcing is when the third-party or outsourcing provider is located in a far-off country, usually in top outsourcing destinations like the Philippines or India. These job functions can be outsourced either through a company or directly with an individual (though this way is much riskier).

Who uses outsourcing?

Contrary to popular belief, businesses of any size can benefit from outsourcing. Large corporations like Google, AT&T, JP Morgan & Chase, Canva, and many others have offices operating in the Philippines for several years now, and it looks like they’re not leaving anytime soon.

Further, there has also been record numbers of small to medium-sized enterprises turning to outsource in the Philippines in recent years. In fact, Outsource Accelerator focuses and helps SMEs to save 70% on staffing costs while getting world-class services from their remote teams. As long as the company is willing to outsource their teams, they most definitely can. No questions asked.

Why do we need outsourcing?

Companies need outsourcing in order to flourish while saving on employment costs. Offshore services providers or business process outsourcing firms can provide you access to the manpower and resources you need for your company, all while giving you options that are fit for your budget.

Outsourcing has proven itself to be a necessity, especially during tough times. With outsourcing, the remote team leaders will take care of staff training, as well as payroll, benefits, and other administrative tasks so your core team can focus on their essential responsibilities. You also could not go wrong with the quality of manpower that you’ll work with, outsourced employees are equipped with the right experience, skills, and educational background for their respective roles.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

The #1 outsourcing authority

Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 900+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.