What Is Offshore Outsourcing? Everything You Need to Know
Offshore outsourcing is the process of working with an outside business and having that external business carry out some of the roles of your business.3 min read
2. Disadvantages of Outsourcing
3. Types of Offshore Businesses
What is offshore outsourcing? This is the process of working with an outside business and having that external business carry out some of the roles of your business. In most cases, the outsourced product or service won't actually be sold in the offshore location, but rather in the country of the business coordinating the outsourcing.
Once an agreement is in place between the business doing the outsourcing and the contractor, all services are performed from the outsourced remote location. Many companies are able to save money through outsourcing, allowing them to be more competitive in both their home country and with businesses in other countries as well. Common tasks that are outsourced include:
- Customer service
- Website design
- Software and content development
- Anything largely location independent.
Advantages of Outsourcing
There are several reasons a company may make the decision to outsource certain tasks or projects:
- Cost reduction. Workers in foreign countries can cost significantly less than American workers. Often, outsourcing will be a financial decision made to save the company money in order to maintain competitiveness in the market.
- No downtime. By outsourcing to a country with a large difference in time zones, the business can operate at all hours, making it 24/7. The business can accomplish twice as much this way, in the same amount of time.
- Professionals from around the world. Without the limitations of physical location, a business can hire someone that excels in the exact skill set it is looking for, no matter where it is.
- Greater ability to change with the times. Technology, especially, changes rapidly and can be rendered obsolete. Outsourcing allows a business more flexibility when it comes to changes.
- Time management. While outsourcing some of the time-intensive but more redundant tasks, the business and employees can focus on growing and nurturing key aspects of the business.
Disadvantages of Outsourcing
As with all things, there are also some negative aspects to outsourcing that a business would want to consider:
- Language barriers. This could become an issue when outsourcing to other countries that primarily speak a different language. Luckily, many developing companies that are often used in outsourcing, such as India, speak English as well.
- Security and confidentiality concerns. A business wants to be very careful with intellectual property and will want to vet any outsourcing options to make sure it can maintain the security of your sensitive information in an acceptable way.
- Irreversible. Some people argue that once certain functions are outsourced overseas, it will be difficult to do any other way in the future. The argument is that the business will no longer be willing to pay more in salaries, taxes, and benefits again to bring a job back to the United States that used to be outsourced.
Types of Offshore Businesses
A task is a good candidate for outsourcing if it needs to be carried out regularly and frequently, and it can easily be done or transferred over the internet.
- Business Process Outsourcing. This is when a business outsources something that is important, but not absolutely vital for the business, to an overseas vendor. This typically includes payroll processing, bill collections, or customer service functions.
- Infrastructure and Technology. These are services that act as a support role for the business, such as technology services or networking. This is a very common option, as businesses have access to world IT experts at a much more cost-effective rate.
- Offshore Software Development. China, India, and Russia are leaders in offshore software development.
- Knowledge Process Outsourcing. These are tasks that require more skill or expertise to complete, such as X-ray interpretation and investment research.
The countries that are able to offer the most in outsourcing services are the ones that have the most outsourcing contracts. India is the most popular for outsourcing, as it offers services in all types of categories, and English is a predominant language. China, Russia, the Philippines, Egypt, and Bulgaria are also countries that take on ample outsourced products. Services these countries offer include data entry, software support, programming, and call center support.
Through real-time communication via Google Hangouts and Skype, many businesses are realizing the world is at their fingertips and are taking advantage of it by using outsourcing to allocate both their time and financial resources more effectively.
If you need help with offshore sourcing, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.