Offshore outsourcing is slowly but surely becoming the norm.
Companies utilise offshore outsourcing services for several reasons: to access specialised skills, reduce operational costs, increase flexibility, expand global presence, and focus on core competencies.
It allows organisations to tap into a global talent pool, leverage cost advantages in specific regions, and streamline operations by delegating non-core functions to external experts.
But before we get into why so many businesses have chosen to cash in on the various benefits of offshore outsourcing, let’s take a quick look at what offshore outsourcing actually entails.
What Is Offshore Outsourcing?
Offshore outsourcing refers to contracting and delegating business functions or processes to external service providers located in a different country or geographical location. This third-party company or organisation, often referred to as an offshore service provider, performs specific tasks or provides services on behalf of the contracting company.
Offshore outsourcing can range anywhere from short-term projects to long-term partnerships and encompass various business functions and industries, including:
- Information technology (IT) services
- Customer support
- Software development
- Data entry
- Finance and accounting
- Human resources
… and many more.
So why are so many companies opting for outsourcing offshore instead of procuring local services? Let’s take a closer look at the various benefits of offshore outsourcing and how offshore talent has transitioned from side hustle projects to high-demand business and career opportunities.
Why Hiring Offshore Talent Is In Demand
There are several reasons why offshore talent is in high demand in today’s global economy. Here are some of the top advantages of offshore outsourcing:
One of the primary drivers behind offshore talent demand is cost savings while maintaining quality. In fact, a staggering 70% of businesses outsource for cost-reducing reasons (Findstack). This is because hiring talent from offshore locations often allows companies to access a highly skilled workforce at a fraction of the cost compared to hiring locally.
2. Access to Specialised Skills
Offshore talent pools often offer access to highly specialised skills and expertise that may be scarce or expensive to find domestically. This is particularly relevant in fields such as software development, data science, and artificial intelligence. 87% of businesses in a recent McKinsey study reported a shortage in IT skills due to recruitment backlog issues. This is a significant advantage of offshore outsourcing as it can bring niche knowledge and technical proficiency to help companies innovate and stay competitive.
3. Scalability and Flexibility
Utilising an offshore outsourcing company allows businesses to scale their operations quickly and efficiently. When there is a sudden increase in demand or a need for additional resources, offshore teams can be rapidly expanded or contracted as required. This scalability allows businesses to be more agile and responsive to market dynamics.
4. Time Zone Advantages
Offshore talent located in different time zones can provide significant advantages, especially for businesses operating on a 24/7 basis. Companies can leverage the time difference to ensure continuous workflow and round-the-clock productivity. In fact, 24% of small businesses have reported increased efficiency due to outsourcing. (Clutch) Tasks can be completed overnight, enabling faster turnaround times and increased efficiency.
5. Global Market Presence
Hiring an offshore outsourcing company can help companies establish a global presence and expand their reach into new markets. About 54% of businesses worldwide use outsourced support teams to connect with their clients and customers. (Fortunly) Offshore teams can bring cultural diversity, language skills, and local market insights crucial for businesses targeting international customers. Having a diverse workforce can also enhance creativity and problem-solving capabilities — yet another advantage of offshore outsourcing.
6. Overcoming Talent Shortages
Certain industries have a shortage of skilled professionals locally, and in business, the level of supply and demand often dictates the pricing of products and services. This can make it challenging for small businesses to maintain a competitive edge. Offshore outsourcing services provide a solution to this problem by widening the talent pool and enabling companies to access qualified individuals who may not be available locally. This helps address talent gaps and ensures that critical projects can be completed within the required timeframe.
7. Focus on Core Competencies
Another advantage of offshore outsourcing is that it allows companies to delegate non-core activities or repetitive tasks to specialised teams, freeing up local resources to focus on core business functions. By outsourcing certain functions to offshore locations, companies can streamline operations, increase efficiency, and improve overall productivity.
8. Technological Advancements
Working with offshore professionals can bring fresh perspectives and innovative approaches to problem-solving as they stay up-to-date with best practices in their respective fields. By utilising offshore talent, companies can leverage the latest technological advancements to drive innovation, improve processes, and stay ahead in the competitive landscape.
Concerns Surrounding Outsourcing Offshore
While outsourcing offshore can bring numerous benefits of offshore outsourcing, there are also legitimate concerns and challenges that companies should consider.
Here are some of the common concerns surrounding outsourcing offshore:
Data security and privacy: Outsourcing offshore involves sharing sensitive business information and data with external parties in different jurisdictions. To mitigate these risks, companies should ensure that proper data security measures are in place to protect their intellectual property, customer data, and confidential information.
Quality control and communication: Managing offshore teams can pose challenges in maintaining consistent quality standards and effective communication. Differences in language, culture, and time zones may lead to misunderstandings, delays, and reduced productivity. This can be managed effectively through clear communication, regular updates, and establishing efficient project management processes.
Legal and regulatory compliance: Companies need to be aware of the legal and regulatory frameworks in both their home country and the offshore location. Compliance with labor laws, intellectual property rights, taxation regulations, and other legal requirements is essential to avoid potential legal issues or reputational damage. Engaging legal experts familiar with international outsourcing can help navigate these complexities.
Risk of intellectual property theft: Outsourcing offshore can introduce the risk of intellectual property theft or unauthorised use of proprietary information. It is, therefore, imperative that companies thoroughly evaluate the reputation and security measures of the offshore service provider to mitigate this risk. Non-disclosure agreements (NDAs) and intellectual property protection clauses should be included in contracts to safeguard valuable assets.
Geopolitical and economic instability: Offshore outsourcing involves reliance on foreign economies and political systems. Changes in government policies, economic instability, natural disasters, or geopolitical tensions can impact offshore operations and disrupt business continuity. It is, therefore advised that companies assess the geopolitical and economic stability of the offshore location to minimise potential risks.
Quality and skill variations: While offshore talent pools can offer specialised skills, there may be variations in the quality and expertise among different service providers or regions. Before acquiring offshore services, businesses should evaluate credentials, portfolios, and client references to ensure the selected offshore partner can meet the required quality standards and deliver expected results.
Dependency and loss of control: Loss of control over certain processes or decision-making can be a concern for some companies as outsourcing critical business functions offshore can create a dependency on external parties. It is, therefore, essential to establish strong service level agreements (SLAs) and maintain active oversight. This will help ensure that the offshore partner aligns with the company’s objectives and maintains desired performance levels.
Reputational risks: If an offshore outsourcing arrangement leads to service disruptions, data breaches, or subpar quality, it can negatively impact a company’s reputation. Customers may perceive outsourcing as a lack of commitment to quality or local employment. However, transparent communication, quality assurance mechanisms, and risk mitigation strategies are key components to maintaining trust and managing these reputational risks effectively.
Outsourcing Offshore With Minimal Risks
Offshore outsourcing can be a huge feat, especially if you don’t have the resources to find the best fit that aligns with your business mission and expectations.
At blackbear, we believe that lack of time and resources should never limit your business potential — why wade in a shallow pond to find the best talent when there’s an ocean of global talent just waiting to be discovered?
We invest our resources in finding top-tier global talent, offering our clients a selection of highly-skilled, experienced professionals to ensure that expectations are not merely met, but exceeded.
But, before you take the plunge, it’s important that you feel confident before you start the outsourcing process. So take your time, have a look around, and explore your options with our free demo.