Jacques Suite

Even if offshoring was initially used just to take advantage of the lower cost of labour in other countries, companies are now taking it one step further by offshoring entire processes. Many companies have discovered that offshoring not only has a positive impact on lowering costs but also enhances organizational capabilities and allows them to innovate at a higher speed.

Since offshoring is not for everyone, there are situations where offshoring can be an advantage and situations in which it would be counterproductive.  It needs to be analyzed whether offshoring will benefit your business goals.

Offshore outsourcing providers can provide all kinds of services across different industries, including financial services, insurance, energy and utilities, telecommunications among others. Thus offshoring could be beneficial not only for the outsourcing services sector but also for other players in related sectors such as IT or e-commerce.

What is offshoring and why do businesses outsource services to other countries

Offshoring and outsourcing are two concepts that companies use to save on costs and increase the efficiency of their employees. Offshoring means off-loading work to another country, while outsourcing is more specific and means off-loading certain functions to another company within the same country. 

For example, some business process offshoring services (BPO) include customer service call centers; computer programming; software development; engineering design and analysis; drafting and architectural modeling and design; medical transcription; legal research and document preparation ; accounting , human resources, insurance claim processing , billing and financial collection; debt collections ; product development ; data entry;  market research ; and financial data analysis . However, offshoring is now also being used beyond the service sector to offload activities such as product design or capital projects, service jobs have become a political issue in some countries.

The benefits of offshoring

Offshoring helps businesses increase their market share and competitiveness within the industry through outsourcing services to other countries that provide better quality services at a lower price. 

In offshoring, the company off-loads some of its work to another country where labour rates are much lower, which makes offshoring more cost-effective for them. 

For example, companies can save money by offshoring their production line if they produce the same number of products every month. Even though reason #1 is about reducing costs, there are definitely benefits besides that – one company thinks ahead and sees there will always be a demand for skilled workers. Their solution? Offering training programs.

Businesses also outsource services to other countries to find better-qualified workers with different work ethics and cultures. offshoring can help companies achieve a diverse and international workforce and also gain insight into how other cultures think. 

Offshoring reduces the need to hire more employees or outsource those services elsewhere. With offshoring, you now have access to global talent pools. 

There are definitely higher risks offshoring your business as opposed to doing it in-house but the benefits offshoring provides makes up for all of that. If you're thinking about offshoring some of your manufacturing, why not do it? 

The risks associated with offshoring and how to mitigate them

As with any other offshoring venture, there are risks to take. What you can do is set up a contingency plan for perceived risks. These plans should be a part of your offshoring process to help minimize offshoring risks.

The main offshoring risk is that the staff you hire overseas may not be up to speed with the demands of your business, or after you have signed on for offshoring services, something unforeseen occurs in the US market that threatens to put a significant dent in your revenues. 

Some other offshoring risks include:

Inability to take advantage of economies of scale due to partitioning. For example, if you outsource one critical project across multiple bpo companies then it becomes difficult to preserve an intellectual property/trade secret while making a switch from one company to another.

Inability to get a timely offshoring services deliverable.

Difficulty in offshoring project monitoring and control due to time differences.

There are many ways to minimize offshoring risks. Some of the most effective off shoring risk mitigation plans involve:

Analyzing your offshoring needs to determine whether you need an end-to-end service provider or a strategic offshore partner. This will help you plan how much interaction is required with the BPO company's staff and what type of communication would work the best for both parties, including setting up a hotline between your customers and their employees. Also not forget that while international outsourcing can offload some of your HR responsibilities, you may need to introduce an offshoring partner to your existing policies and procedures.

Employing a strong offshoring risk management program with clearly-defined offshoring procedures that encompass all types of offshoring services 

Having enough time set aside for the offshoring process, including having a backup plan in case things go wrong. Don't fall into the trap where you expect the bpo company's staff to understand your business needs and culture right away. You should be prepared for their lack of understanding and simply work through it together.

Tips for successfully outsourcing services to another country

For the most part, offshoring services to another country can be extremely rewarding. It's a great way to keep costs low and increase production speeds; however, this should only be done if you're aware of the challenges that may arise during offshoring.

If your business is considering outsourcing one or more business functions like accounting, customer support or other non-core activities then it's important to take into consideration some tips for offshoring successful information technology (IT) service processes .

Cultivate good communication with your offshore contact.   Make sure they are experienced in offshoring services before you hire them too quickly without first checking their credentials. Poor communication between employees at different locations can lead to reduced productivity, higher overhead costs, and even lower performance.

Clearly define the offshoring services agreement that you hope to establish (i.e., weekly, daily rates). If offshoring services is done correctly it can be a win-win situation - so make sure your company is getting what they need out of the offshoring process without overpaying for services rendered.

Make sure there are incentives in place for offshoring employees who achieve goals or exceed expectations on offshoring projects . This will ensure quality work output while also improving employee morale by establishing clear goals with achievable rewards attached to them .

Monitor offshoring progress constantly . It's important to always keep track of off shore productivity by hiring an outside third party offshoring agency to monitor off shore projects progress. An off shoring management or off shoring services company that specializes in offshoring is the best person to hire for constant offshore outsourcing scrutiny.

Make sure your offshoring employees are highly educated . Offshore investment is contingent on location, skills, language abilities and other factors including education levels. Based on this you should make sure to thoroughly research country skill sets before committing to an offshoring agreement .

Know what's included in offshoring contracts - it's important that both parties have a clear understanding of which processes are being outsourced. This could be helpful when evaluating pricing for offshoring services too since there may be certain tasks that couldn't be offshored due to various factors.

Evaluate the offshoring agreement periodically . If offshoring services are kept in-house, make sure to re-evaluate off shore outsourcing agreements on a regular basis and establish new off shoring goals if necessary.

Don't let offshoring become a replacement for offshore outsourcing - offshoring should simply be used as a means of providing better service for clients who don't require high levels of customer support or immediate product modifications/technical support issues. In these cases, offshoring can save significant time and money by allowing employees to focus on higher priority tasks while offshore employees handle the routine responsibilities from overseas locations.

Make sure your company has all of the offshoring resources it needs before offshoring. It's important to make sure that offshoring is the best way forward and that there aren't any other options available.

Evaluate offshoring companies based on their business history and experience in offshoring before making a final decision. Make sure to do thorough research about offshoring service providers in different countries and compare costs, effectiveness, reliability, flexibility etc. before committing to a final offshoring agreement with one particular company from abroad.

In conclusion, outsourcing services to another country can be extremely rewarding for businesses who use offshoring opportunities correctly. If done wrong, however, offshore outsourcing can result in reduced productivity, slower times and even lower product quality altogether. Make sure to follow offshoring tips outlined in this article, to ensure that offshoring services are yielding the results you were hoping for.