Offshoring services: What you need to know
What is offshoring?
Offshoring is the process of transferring certain business functions to a third party provider located in an offshore destination, usually in developing nations. Companies offshore outsource due to a lot of reasons, but mainly to save on costs and take advantage of the perks that these offshoring destinations offer.
One perfect example of offshoring is companies delegating their customer support services to call centers in the Philippines and India. This is a proven, successful, and strategic move for businesses worldwide. Due to this, the industry expanded. Other tasks and responsibilities aside from customer service, like engineering, IT, and administrative roles are now also being offshore outsourced.
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Why businesses choose offshoring
Offshoring sometimes faces a little bit of a backlash, as some people believe in a certain misconception that it “takes away jobs.” Offshoring doesn’t take away jobs, it just moves the tedious roles to a third party provider so companies’ core teams can focus more on their main responsibilities.
Further, companies choose offshore outsourcing for a lot of reasons:
- To save on employment costs. Paying for the labor workforce in developing offshore nations is much more cost-effective than hiring in-house. Add to that the additional expenses like office space, parking slot, equipment, internet connection, and more.
- To make up for lack of qualified talent. Some companies feel the need to offshore outsource because the talents that they need are not available in their area. Employees qualified for skilled roles like bookkeeping, human resources, or even virtual assistants can be hard to find in some countries, while they are abundant in the others.
What roles do businesses offshore outsource?
Today, due to the advancement of technology, businesses can outsource almost their whole operations to an offshore location. However, the most common roles that companies transfer are the following:
- Virtual assistants
- Bookkeepers
- Engineers
- Telehealthcare providers
- Content writers
- Copywriters
- Telemarketers
- Customer service agents
- Technical support representatives
- Lead generation specialists
- Digital marketers
- Graphic designers
Offshoring vs onshoring vs nearshoring
People often interchange and mix up offshoring, onshoring, and nearshoring. It’s time to clear the confusion regarding these terms.
Offshoring
Like mentioned above, offshoring is the process of moving certain parts of a business to an offshore location due to a variety of reasons. Offshore outsourcing is transferring business functions to faraway outsourcing destinations. If the company’s headquarters is in the United States or Canada, then offshore locations would be on the other side of the world: the Philippines, India, China, Indonesia, Singapore, and other Eastern countries.
People usually confuse offshoring with outsourcing. Keep in mind that outsourcing doesn’t necessarily mean offshoring, while offshoring automatically means outsourcing your business functions.
Outsourcing doesn’t necessarily mean offshoring, because it can also be referred to onshoring and nearshoring. Onshoring and nearshoring will be defined in the next chapters.
Onshoring
Onshoring, which is also known as domestic outsourcing, is a different kind of outsourcing. It is the practice of transferring business functions to a third-party provider located in the same country or city as the firm’s headquarters. Its purpose is to save on costs, save on office space, and to delegate the overseeing responsibilities, among others.
In addition, onshoring can also be defined as the practice where businesses who have done offshore outsourcing for certain business functions move these operations back to the country from which it was originally located. Some benefits of onshoring include similar time zones, similar language and culture, smaller travel expenses, easier physical quality assurance checks, and more.
Nearshoring
Nearshoring is a business strategy and form of outsourcing. It is when a company decides to delegate some of their business activities to an external services provider located in a nearby country. For example, if a company’s main office is located in the United States, nearshoring means transferring work to an outsourcing provider located in nearby countries like Mexico, Canada, or any part of Latin America.
In addition, nearshoring can also mean that a company is transferring its previously offshore outsourced services to an external provider from a nearby country. Some benefits of nearshoring include: lower costs (compared to hiring in-house); same time zone; offices are geographically closer, and more.
Challenges companies face when offshoring
More and more companies have tried offshoring. It has many benefits for a business, and it helps companies expand their operations and labor workforce more easily, and at a cost-effective price.
However, like any other business decision, offshore outsourcing is bound to have some challenges.
Data security issues
One of the main reasons why businesses are doubtful about offshore outsourcing is because they do not trust the data security measures that offshore business process outsourcing (BPO) providers undertake. It’s hard to make business decisions by relying on doubts and misconceptions. Ask a trusted offshore outsourcing advisory to learn more about BPO companies’ data protection measures.
Cultural incompatibility
One of the usual issues companies face when offshore outsourcing is cultural incompatibility. This can range from language and cultural barriers to different work cultures. However, communication is key. Make sure to always communicate clearly and efficiently. In addition, this can be a great opportunity to learn more about other cultures, which can contribute to creating a more dynamic and world-class pool of talents.
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Different time zones
Offshoring means working with a remote team that operates 12 hours before you do. Companies may think that this could result in missed deadlines and weird working hours. However, this has already been fixed by offshore BPO services providers.
BPO companies in the Philippines operate depending on their clients’ work hours. When you visit the Philippines, you’ll notice that major cities and business districts come alive at night. This is because work usually starts at 9 in the evening for the majority of BPO employees. They adjust their work schedules to their foreign counterparts for easier communication and more efficient work days.
