What is offshore outsourcing?

Offshore outsourcing is a term you’ve probably come across, especially when businesses speak of cutting operational costs and scaling quickly. But what does it really mean and is it right for your business? 
Considered the ultimate guide on the topic, this blog will delve into the deep waters of offshore outsourcing definition, the benefits of offshore outsourcing, offshore outsourcing pros and cons, and real-world examples of its implementation. Whether you are into tech, retail, or services, this guide will help you determine whether offshore outsourcing is right for your organization.
At Digisoft Solution, we empower businesses to face outsourcing and offshoring confidently. Be it appointing an offshore IT outsourcing service or establishing an offshore company for long-term partnerships; we have it all covered.

Key Takeaways in Offshore Outsourcing

• Offshore outsourcing is the process of hiring foreign talent or services to carry out some business functions.
• Labor costs may be reduced to an extent of about eighty percent.
• It can scale operations without the commitment of hiring for the long term.
• Cultural differences and quality control present major challenges, but they can be managed.
• Based on having a clear plan, you are well-positioned to begin and manage your outsourcing journey.

Explanation of Offshore Outsourcing

Offshore outsourcing refers to entrusting external service providers from a different country with providing certain services or carrying out certain activities. For example, while a US-based technology company might want to go for some offshore outsourcing for software development in India, it is trying to tap some specialized talent and cut costs by a large margin.

People often confuse the terminology used in this space. Here are some definitions to help clarify the distinctions

• Outsourcing versus Offshoring: Outsourcing is the delegation of tasks and activities to third parties, irrespective of location; offshoring, by contrast, is the changing of operations in a country. Offshore outsourcing is both, when you are outsourcing tasks to providers in other countries.
• Offshoring vs Outsourcing: Offshoring means that an organization is physically moving some of their internal operations overseas, while outsourcing can also be done domestically or offshore.

Offshore business process outsourcing has grown around the world as organizations look to improve margins, find high-end talent, and increase efficiencies while avoiding more investment in their internal operations. 

Offshore vs. Nearshore vs. Onshore

Benefits of Offshore Outsourcing

• Scale Your Team Without a Drastic Increase in Your Costs: Hire global talent at one-tenth the price locally! Offshore services provide a way for you to grow with no overhead.
• Have Your Team Work 24/7 Without Overburdening It: Set up support operations in a different time zone to ensure 24-hour support. Digisoft Solution allows you to develop offshore teams supporting continuous operations.
• Bring in Specialized Skills Not Available Locally: Offshore IT outsourcing can unlock the rare and in-demand skill sets. Be it data analysts or developers, the best talent awaits you outside.
• Be More Flexible and Adaptive to Market Changes: Need to scale fast for the launch of a product? Offshore outsourcing gives you the flexibility to expand or contract-fill business needs.
• Focus on Core Operations: Let Others Handle the Routine: This value-driven growth occurs while the partners perform such tasks as data entry, customer support, or payroll processing.
• Save Costs on Infrastructure and Training: These dimensions are cut because of outsourcing and offshoring.
• Minimize Risks When Hiring with Flexible, Trial-Based Engagements: Try before you buy. Digisoft Solution offers a trial period to verify what will work best for the flow of talent to their tasks.
• Improve Your Business's Agility With Faster Onboarding: Kick-start projects now, using candidates already pre-vetted from the guaranteed up-to-quality offshore business services.

Risks of Offshore Outsourcing + Solutions

• Communication & Coordination Difficulties Across Time Zones: Different time zones can make team management lead to delays and miscommunication. Quick turnarounds can be challenging, particularly in critical phases of projects.
  Solution: Utilize collaboration tools such as Slack, Zoom, or Asana to remain connected to the team. Define overlapping working hours so updates can be made in real-time. Invite asynchronous communication time on things that are not urgent to not stop progression of the work.
• Disparate Quality Control Standards: Quality of expectations vary due to geography or culture, which can lead to deliverables that vary in consistency and/or deadlines that are not met.
  Solution: Define clear quality standards and guidelines of the project. Define success, share reference points, implement quality control and provide feedback loops to ensure everyone is aligned in the long run.
• Data Security & Privacy Risks: Working across borders often means different data protection regulations. This may expose your confidential information to undue risk.
  Solution: Establish some security measures like VPNs, encrypted communication, access controls, and follow global standards, for example, GDPR. Have periodic security audits and ensure you have signed non-disclosure agreements (NDAs) with your offshore partners.
• Cultural Differences Disrupting Workflow: Different work ethics, communication styles, and holiday calendars can have an impact on productivity and collaboration.
  Solution: Providing cultural training, encouraging open communication, and promoting collaboration can help teams work more effectively and productively. Assign team members as cultural liaisons to help bridge any gaps in understanding or relationships between people from different cultures. Also, regularly organize team-building and relationship-building activities to strengthen connections and improve teamwork.
• Over-Reliance on Third Party Providers: If you depend heavily on one provider and they have problems of any kind with resources or technology, your workflow could be severely disrupted.
  Solution: Keep a good mix of in-house and outsourced functions. Use more than one vendor if permissible. Develop alternative workflows to make sure you have options when workflow is critical.
• Unexpected Hidden Costs & Scope Creep: There may be unexpected costs related to training, overtime or contract terms. If the project is in a different currency, there may also be unforeseen changes in budget due to currency exchange rates.
  Solution: Confirm all details costs related to in the contract. Monitor levels of currency shifting, use project management tools and review budgetary reports regularly to keep you on budget.
• Control of Operational Processes is Lost: Limited oversight can create barriers to monitoring execution of tasks, and accountability.
  Solution: Engage experienced/project managers and develop a checklist to measure milestones. Schedule regular check-ins and use team collaboration software to provide full transparency.
• High Turnover & Trouble with Talent Retention: In many offshore areas the high degree of attrition can be disruptive to a project and the morale of the team.
  Solution: Work with organizations that build engagement with their employees. Provide onboarding and upskilling opportunities, and let them know formal performance incentives for top talent. 

3 Real-World Examples of Offshore Outsourcing

• Slack's Offshore Desvelopment Team: Slack leveraged MetaLab in Canada for its product design & development. In this offshore outsourcing software development model, Slack grew into a billion dollar business.
• Amazon's Offshore Customer Service Centers: Amazon uses offshore business process outsourcing to offer customer service 24/7 through centers in India and the Philippines.
• Time Doctor's Remote Administrative Team: Time Doctor's HR and admin functions are outsourced to the Philippines so they can focus on innovating. 

How to Get Started with Offshore Outsourcing with simple 9 steps

• Determine Tasks to Outsource: Identify tasks that are repetitive and/or tasks you don't consider core responsibilities.
• Investigate Where to Outsource: India is the best option for technological services and the Philippines is good for support.
• Provide Clear Project Directions & Requirements: Define quality requirements, timelines, and goals.
• Set a Budget & Confirm Cost Arrangements: Remember to budget for everything - labor, tools, currency fluctuations, anything that could be an expense.
• Establish Communication Channels: Recommendations include Zoom, Asana, & Slack.
• Start by Testing a Small Project: Evaluate performance before committing.
• Monitor Performance Periodically: KPI monitoring and constructive feedback.
• Make Modifications as Required: Be prepared to change the roles, tools and team sizes as you will find you will always want to change something.
• Scale Up when Your Partnership Is Going Well: Once your offshore outsourcing services are clearly effective you can add to scope.

Conclusion

By reducing expenses, utilizing people from around the world, and guaranteeing operational efficiency around expansion, offshore outsourcing can help you stay competitive. Ensure you find the right mix of offshore outsourcing by understanding its definition and evaluating the pros and cons.
Digisoft Solution can make your journey into offshore IT outsourcing easier. We provide pre-vetted professionals, cost-saving solutions, and guaranteed performance for your piece of mind, be sure to choose Digisoft Solution as your trusted offshore outsourcing company.
Ready for all of the benefits of offshore outsourcing? Contact Digisoft Solution today!