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A Beginner’s Guide to Offshoring

Do you have questions about offshoring your core business tasks?

The leap into offshoring is often intimidating for a company. The idea of offshoring, or partnering with another company in a different country who provides you with essential services, requires a huge shift in the way you do business, both internally and externally. However, the benefits of offshoring are undeniable.

In this beginner-friendly guide, we’ll explain the basics of offshoring along with essential tips for success if you choose to take advantage of this business practice. Let’s get started.

What Is Offshoring and How Does it Work?

In a nutshell, offshoring is when one business contracts with another business that’s located in a different country to complete a task or provide an ongoing service.

Business process offshoring, also known as BPO, is a specific type of offshoring where the contracted foreign business provides necessary but non-core services, such as accounting, customer service, or human resources. In this guide, we’ll focus on BPO.

When a business contracts with a BPO business, it works with a partner that specializes in a particular area. Every type of business can benefit from BPO.

One common objection to offshoring is the idea that it steals jobs from the business. To the contrary, BPO supports the business by providing supplementary services. In this way, the business is able to focus on its own essential tasks without distraction.

What Are the Benefits of Offshoring?

Why should you work with a company from another country?

There are many valid reasons to consider offshoring. Here are the most common reasons:

Reduce costs – The financial benefit is perhaps the biggest reason many businesses choose offshoring. The cost savings from working with a competent staff in a developing country can make a huge impact on a business’ financial stability.

Grow your business quickly – Offshoring saves you and your team members time. Instead of completing simple or repetitive tasks, you can hire someone else to do it. This frees you up to grow your business.

Focus on your core business by offshoring secondary roles – All the time that you save from collaborating with an offshore business can be invested back into your core business. Your team members can then concentrate on performing their jobs which will improve workplace efficiency and productivity.

Find talent outside of your immediate location – When you work with an offshore business, you’re not limited to your location to find the talent that you need. You can work with highly qualified individuals from another country who can provide superior service at an affordable cost.

What Are the Drawbacks of Offshoring?

Although offshoring packs a lot of benefits, there are a few drawbacks to consider before making the decision to partner with a BPO.

Confidentiality concerns – When you work with an outside company, you may share proprietary data. It’s important to protect your data and sign a confidentiality or nondisclosure agreement prior to contracting with a BPO.

Lack of control – Partnering with another business means that you relinquish control over a task, or even an entire section, of your business. That can be scary, especially if you aren’t sure that you trust the other business to provide quality service. To combat this, work with a BPO who specializes in a particular task and comes with third-party recommendations to prove it.

What’s the Difference Between Offshore, Nearshore, and Onshore?

Offshoring mistakes

There are three main types of business process companies: Offshore, nearshore, and onshore. The individual needs and preferences of your business will determine which type of company to use. Let’s take a closer look at each type:

Offshore – Offshore businesses are located outside of your business’ home country, and often operate in a different time zone. The benefit of using an offshore business is largely financial. You’ll save more money when working with an offshore business because of it’s often more affordable to hire remote workers in a distant locale.

Nearshore – Nearshore businesses are located in a neighboring country and may share the same or similar time zone. The benefit of using a nearshore business is cultural. You’ll partner with a business who shares similar values and way of life. This can reduce cultural misunderstandings.

Onshore – Onshore businesses are located within your same country. While you often pay more for partnering with these service providers, the benefit you’ll gain is improved communication.

What’s the Difference Between Offshoring and Outsourcing?

The two terms “offshoring” and “outsourcing” are often used interchangeably, but there is a distinct difference between the two.

Outsourcing means contracting with a company who provides some type of service.

Offshoring means getting work done in a different country.

It’s possible to outsource without offshoring. You can partner with a local company to provide necessary business services. It is also possible to offshore without outsourcing. This may refer to opening up another location, or an integral part of your business, in a different country. For example, you may have your headquarters in Sydney but have a factory in Manila.

Tips to Successful Offshoring

Let’s discuss how to be successful if you decide to work with an offshore service provider.

1. Assess your needs

Before you make the decision to work with an offshore business, you must determine whether or not it will benefit to your business. Start by looking at your business needs.

Can they be filled by the staff you have on hand or will you need to hire additional support?

Does it make more sense to hire one person to perform the task or would it be more economical and/or efficient to hire a BPO instead?

Here are 10 additional questions to ask before hiring a BPO.

2. Understand your goals

What are your business goals? Would you like to:

  • Free up your time so you can concentrate on developing your business?
  • Provide more support to your staff?
  • Reduce costs?

Whatever your goal for offshoring, keep that in the forefront of your offshoring plan so that you can map out a path to success.

3. Create an offshoring strategy

As mentioned above, it’s important that you have a plan in place before you work with a business from another country. To help you get specific with your plan, answer the following questions:

Here are 5 questions to ask when creating an outsourcing strategy: Click To Tweet
  • What services will you outsource?
  • How long will you need/want to outsource?
  • How much can you afford to pay a BPO?
  • Do you prefer working with an offshore, nearshore, or onshore BPO?
  • What short term and long term goals would you like to accomplish when working with a BPO?

4. Work with a Quality BPO

Before contracting a BPO, make sure that they’re the right fit for your business. Do they share a similar vision to your own? What are their top priorities? An emphasis on providing customer care, the consistent ability to deliver excellent outcomes, and dependability are the most important things to look for in a BPO. When interviewing BPO companies, look for these qualities.

5. Rely on References

Your BPO should provide you with references, case studies, and testimonials. Follow up with their customers before making your decision. Don’t just go for the lowest bidder. Instead, do your due diligence and verify that the BPO is a quality offshoring partner.

6. Make Communication a Top Priority

When working with another company to handle tasks, communication is key. Adequate communication on an agreed upon frequency reduces the need to micromanage. Be sure to choose one person in your business to serve as the main point of contact with the BPO, and also know who to reach out to when you have questions or urgent concerns.

Should You Consider Offshoring?

The decision to work with an offshore business depends on your own business needs and goals. How fast are you looking to grow your business? Are you comfortable with the idea of contracting non-core tasks to another business?

If you’d like to learn more about how Australia’s top offshoring company can help your business, contact us now.

Don’t forget to download this list of 10 additional questions to ask before hiring a BPO.

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