Offshore Outsourcing: What You Need to Know
Weigh the pros and cons. Choosing the right outsourcing partner to help your brand reduce costs while improving your customer experience delivery is a big decision.
Offshore outsourcing has become a way of life for an increasing number of organizations seeking to streamline workflow and save on costs. But what does that mean for their business functions?
What is Offshoring? A Definition
Simply put, offshore outsourcing means moving one or more of an organization’s business activities or processes (outsourcing) to another country (offshoring).
Notably, there are other outsourcing options besides offshoring. Onshore, or domestic outsourcing as it is sometimes called, is when an organization moves one or more of its services or processes to another company whose premises are based in the same country. An onshore outsource partner is beneficial if you prefer a partner in your time zone and geographically closer, but that comes with a higher cost to serve.
Nearshore outsourcing is the practice of outsourcing services to a nearby or neighboring country. There are many benefits of nearshoring but the time zone compatibility and the cultural closeness of the two countries are perhaps two of the most favored. Nearshoring can be just as costly as onshoring, and is generally less cost efficient than offshoring.
A mixed or hybrid shoring approach, with operations spread across multiple sites, territories and countries, provides many brands with benefits, like the opportunity to offer more hours of customer support coverage, or to create a robust business continuity plan. Organizations that have successfully maintained their operations and upheld connections with their customers, even as the pandemic progressed, are often those that have offshore as part of their outsourcing mix.
Popular Offshore Outsourcing Locations
India – Considered the birthplace of offshore outsourcing, with a large pool of highly educated, English-speaking talent and robust infrastructure, India’s workforce is culturally well placed to manage sales support activities. It is also an ideal location to provide non-voice live agent activities, including chat and messaging management and IT help desk support.
The Philippines – Well aligned with Western culture and English spoken as a second language, the Philippines is often chosen as a location for outsourced voice-based customer support activities due to the neutral Filipino accent being widely accepted by consumers in English-speaking countries around the world.
China – Over the past 20 years, outsourcing has grown rapidly in China. U.S. companies are increasingly considering this location as an offshore outsourcing option. As one of the largest economies in the world, China offers a talent pool with strong English and IT skills.
The Pros of Offshore Outsourcing
1. Lower Labor Costs
The main reason most organizations choose offshore outsourcing is the potential for cost savings. The lower cost of living in developing countries in Asia, for example, can significantly help boost a company’s profits. Some experts say that organizations that outsource overseas can, on average, expect savings of around 15%. These savings are realized through lower labor costs, cheaper materials, increased efficiency and greater service offerings which drive earnings.
2. Access a Skilled and Specialized Workforce
In most instances, organizations choose an offshore outsourcing company because they intend to maximize the opportunity to acquire the available skilled and specialized resources.
Some specialized fields like IT, software development and finance can be difficult to hire domestically. Offshoring these technical operations allows you access to professionals with the requisite skills. Major tech companies like Microsoft and innovators like Google are all outsourcing and opening innovation hubs in offshore locations including India.
3. Free Your Business to Focus on Its Core Activities
Aside from the obvious cost savings, offshore outsourcing gives organizations the flexibility to focus more of their effort on their core business processes. For example, outsourcing your routine, rule-based back-office tasks makes valuable resources available to address high complexity operations, which can ultimately increase profits.
Many organizations also seek out offshore outsourcing to support their seasonal recruitment needs, while at the same time reducing the otherwise hefty recruitment and operational costs. This ultimately establishes a diversified and scalable customer support delivery platform. Countries like India, China and the Philippines, with their abundant labor pools, are renowned offshore outsourcing locations offering seasonal support.
4. Cost-Effective 24/7 Support
Businesses traditionally operate from 9 a.m. to 5 p.m. but, with the advent of the internet, organizations no longer have standard business hours. Customers expect an immediate resolution to their issues, even if it is at 3 a.m. Without outsourcing, this kind of 24/7 accessibility is difficult and costly to achieve. Having that kind of support can make a world of difference to your business. Problems are immediately solved and customers are happier, creating the opportunity to build brand loyalty. Capitalizing on labor markets in a range of times zones supports the delivery of 24/7 support, in multiple languages and across multiple industries.
The Cons of Offshore Outsourcing
1. Third-Party Management
Outsourcing agreements can sometimes fail to achieve the proposed benefits, not because the goals were ill-conceived but rather because of inadequate planning and execution. Your offshore outsourcing provider should be an extension of your business and all that your company represents and as such these agreements should be managed continuously, and not as a one-time event.
Having a dedicated person within your outsourcing partner’s organization to manage timelines and address queries as they arise will keep your outsourced operations running smoothly. Do your due diligence and request customer references from the offshore outsourcing provider that you plan to hire.
Some businesses can be concerned about a third-party managing their business and customer data. Whether your business processes are managed internally or outsourced, the risk of a data breach is growing all the time, but so are the tools, technologies and procedures required to provide protection. The right outsourcing provider will be well placed to help you to identify risks and ensure adherence to protocols. How well do their employees follow them? Take the time and the steps necessary to mitigate these risks. Request international references and obtain feedback before committing to an offshore outsourcing provider. Does your offshore outsourcing provider have the proper protocols in place? How well do their employees follow them? Take the time and the steps necessary to mitigate the risks of malactors. Request international references and obtain feedback before committing to an offshore outsourcing provider.
2. Time Zone Variances
For some organizations working in different time zones can be a challenge. But, these unique time zones can support ease of use by providing 24/7 services. Typically, offshore outsourcers are located five to 12 hours away from their customers, so select an outsourcing provider who can work to the hours you need. It is commonplace for business process outsourcers (BPOs) to mirror or extend beyond their customers’ working hours helping to alleviate the challenge of collaborating across time zones.
Having a team in another time zone can give you a competitive edge: more productive hours. You will be able to maximize your time and finish projects faster. Increased productivity and good customer feedback equal growth. Your turnaround time improves as your business operations run smoothly. And your customers are happy as you have exceeded expectations.
3. Communication, Cultural and Social Differences
In India, China and Southeast Asia there is traditionally a focus on well-defined instructions and structured processes. On the other hand, Eastern European cultures are similar to that of Western Europe and the U.S. and tend to be appreciate the flexibility and proactiveness of direct communication.
This highlights the need and importance of cultural compatibility and cultural adaptability. To be successful, organizations need to be aware of and informed about handling culturally diverse situations.
In most outsourcing locations there will be some cultural and social hurdles but these can be overcome and the right customer experience (CX) partner should help to facilitate smoother integrations. Quickly identifying the social traits that can be accommodated is the first step. Learning to interpret and adjust to these traits takes constructive and open conversations which decrease the potential for issues to arise. Before outsourcing to offshore locations, companies must understand any language and cultural barriers that may affect their business.
Offshore Outsourcing Delivers Business Results
In summary, a company’s outsourcing strategy should include more criteria than just cost-effectiveness. According to the second annual Capgemini Executive Outsourcing Survey, the top five things executives look for when they choose an outsourcing country are: labor costs (79%), technology and infrastructure capabilities (62%), skilled labor (61%), language proficiency (49%) and economic stability (44%). Your BPO partner will be able to help you to determine the most appropriate outsourcing locations based on your individual business needs.
Sitel Group® is one of the largest global providers of customer experience products and solutions. We empower brands to build stronger relationships with their customers by creating meaningful connections that boost brand value. Present in 40 countries across the globe, our footprint makes us one of the few truly global players in the industry.
To discover how brands leverage India’s diversified model to deliver seamless and scalable customer service, download the India 2.0: A Diversified and Scalable Delivery Platform for CX whitepaper.