Offshore outsourcing can be a great way to save money on labor costs, open up a wider talent pool, or even expand into another country.
Offshore outsourcing is nothing new. Businesses have been doing it for decades, but the market is changing in scale, nature, and the type of roles that are being outsourced. Technological advances are making the world smaller, breaking down barriers, and reducing limitations on who a company works with or where its staff should be based. At the same time, evolving markets and changing customer expectations are opening up more opportunities and changing business attitudes to what they expect from outsourcing.
What is offshore outsourcing?
Offshore outsourcing is the practice of moving some or all of a company’s operations overseas. Companies will hire a separate company to manage operations that would normally be managed entirely in-house. It has normally been seen as a way to reduce costs by taking advantage of lower labor costs. However, it can also open up new talent pools, and provide new ways of engaging with your customers.
Common examples of outsourcing include call centers, support desks, or financial services. However, as technology becomes more sophisticated, companies here in the UK are finding opportunities to work with a much wider range of service providers in professional industries such as marketing, IT, or software development. As the market evolves so too are some of the main advantages.
Value for money
The most common motivation behind outsourcing remains the chance to benefit from lower labor costs. Countries such as India and the Philippines have always led the market thanks to low average wages within the country. Call centre staff, from India, can be hired at a fraction of the cost of their counterparts in the UK.
Some countries may also offer more favorable taxation conditions or labor laws making them ideal partners. With English being commonly spoken across the world, many basic functions such as customer service or technical support roles could be delivered easily from any location.
In an environment in which profit margins have been tightening outsourcing represents an opportunity to save money.
Broadening the talent pool
A more globalized economy is leading to a more globalized workforce. Today a business needn’t be constrained by the talent in their local areas. They can reach out and engage with any professionals anywhere they want. Faster telecommunications make it possible to collaborate instantly with people by video link and instant messaging. By casting the recruitment net wider you can build the team you want rather than make do with the local talent available.
Engaging the services of foreign talent can also introduce other cultures and perspectives into your operations, all of which can open up a host of surprising opportunities.
Expanding into new markets
Offshore outsourcing can be the first step towards global expansion. It can open up new markets, new customer bases, and new revenue opportunities. Expanding into a new country can be risky, especially if you have no knowledge of the market and how it operates.
Using employees from that country enables you to benefit from their local knowledge. It provides you with the flexibility to adapt your product or service to the demands of that market raising your chances of success.
24/7 availability
Customers are becoming increasingly demanding. They expect round-the-clock support. Time differences in outsourcing locations mean you can easily provide out-of-hours services without having to develop a costly 24-hour operation in the UK. Good outsourcing companies can provide access to trained and highly professional staff to handle any inquiry.
You could combine an outsourced call center with operations in your home country – switching between the two seamlessly to provide continuous customer service throughout the day and night.
Expertise and the latest technology
Handing over operations to specialist companies means you can capitalise on their specialist knowledge and technology. For example, a specialist financial company will have dedicated financial and customer services working with the latest finance software to deliver first-class customer service.
Handling these operations in-house often leaves you having to make do with existing staff and old-fashioned outdated technology. Hiring specialists means you can benefit from sector-specific specialists and state-of-the-art technology to deliver better and more fulfilling customer services.
Things to watch out for
Outsourcing, of course, does not come without its challenges. Engaging staff from a foreign country has logistical, operational, and in some cases reputational risks. When employing someone from overseas you’ll have to comply with all relevant employment laws and regulations. Working in a new and unfamiliar country will include a host of challenges and risks. It will be all too easy to make unintentional compliance errors or fail to keep up with changes to local regulations.
Setting up legal entities in those countries can also be costly and time-consuming. It requires a certain commitment in terms of resources.
Working with a local outsourcing partner can help with both challenges. They will have local knowledge of the market and regulations and can help you avoid any mishaps. They can also provide skilled qualified staff and manage the day-to-day requirements of managing employees without you needing to set up a legal entity.
One way to do this is through an Employer of Record company (EOR). The EOR will hire specialist staff who have a full understanding of local laws and can keep up with any regulatory changes. The EOR will be the legal employer of your staff which means liability will rest with them.
Choosing your country
When choosing offshore outsourcing, you will also have to pay close attention to your choice of country. Destinations such as India are very low cost but cause friction with customers due to language barriers. Although English is widely spoken, accents can be hard to understand over the phone.
More recently, destinations such as South Africa have come to the fore. Labor costs are between 40% and 60% of that of the UK which means it’s still a cost-effective solution. However, English is widely spoken with a clear and understandable accent. The country is also a good cultural match for the UK which makes it easier for call centre agents to engage with customers on a deeper level. It offers the perfect mix of affordability, access to talent, and a time zone and cultural match to help you get the most out of your outsourcing strategies.
There are, therefore, many advantages of offshore outsourcing. It can save money, open up new opportunities, and build longer-lasting and more profitable relationships with your customers. Support from a dedicated EOR can help you manage compliance, recruitment, and ongoing support to ensure a profitable and successful outsourcing strategy.
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