When it comes to hiring employees, there are benefits of offshoring. What are they? Read on to learn the top 10 benefits of offshoring and why you should use this strategy for your business.
For many decades, offshoring has been an innovative solution for many businesses. Initially, its primary focus was on production assembly tasks.Like any other business process strategy, offshoring has advantages and disadvantages. However, the pros outweigh the cons in this matter.
Today, offshoring has evolved to employ customer service, sales, and even IT solutions. Small- and medium-sized companies enjoy the advantages of offshoring, including cutting costs, solving hiring problems, and generating output. But what are its other benefits, and what are its drawbacks? Let’s find out.
What is Offshoring?
Offshoringis the relocation of a business process to another country. A subsidiary of the same company or an offshore services provider can perform the offshoring operation. Offshoring can either be production offshoring or services offshoring.
If you are a business owner thinking about offshoring your company’s business process, you might first ask yourself the benefits of offshoring. Other questions you might have in mind are “What are the advantages of offshoring and its disadvantages?”, “Who can help you build an offshore team?”, “Should you establish a foreign subsidiary or hire an offshore services company?” and so on. This article will help you decide if offshoring is ideal for your business, given the pros and cons of offshoring.
Top Benefits of Offshoring Today
When companies do offshore outsourcing, they reap many benefits from it. Here are the top 10 benefits of offshoring:
1. Lowers Salary Costs
On average, a US developer earns a gross salary of $122,478. In comparison, a software developer in the Philippines makes an average of $17,579.95. Evidently, there is a significant difference between compensations for IT talent in the US compared to offshore locations. The Philippines’ cost of living is generally lower than many developed countries. This difference in living expenses directly influences salary expectations.
Moreover, the currency exchange rates between the Philippine Peso (PHP) and major currencies like the US Dollar (USD), Euro (EUR), or British Pound (GBP) often favor businesses offshoring to the Philippines. Companies paying in stronger currencies can leverage exchange rates to offer competitive salaries in PHP without incurring high costs in their currency.
2. Higher Savings on Operational Costs
Maintaining an office in the US means higher real estate costs. Besides that, you also have to think about business taxes, utilities, and labor costs. One would need to invest a lot to have a physical office where employees can work.
When offshoring IT talent, lower real estate costs in overseas locations like the Philippines can be utilized to optimize cost savings and operational efficiency. Moreover, partnering with offshore providers like Full Scale allows companies to leverage existing facilities in lower-cost regions. You can have access to well-equipped workspaces at a fraction of the cost. This strategy minimizes the need for extensive investments in infrastructure, saving on real estate expenses.
3. Access to Qualified IT talent
One of the most significant limiting factors in business is finding highly-qualified employees. Additionally, with the ongoing IT talent shortage in the US, you must find solutions to that big problem.
India and the Philippines are countries where you can hire your IT staff. The IT industry is flourishing in these countries due to active government support and IT programs.In the Philippines, the government offers incentives to attract foreign investments, including offshoring companies. These incentives may come in tax breaks, special economic zones, or support for training programs.
Also, schools are producing more graduates per year. You are sure to find the right candidate to hire. These two countries are included in the top offshoring destinations, especially in tech development.
The Philippines has a large pool of skilled IT professionals. The talent supply exceeds the local demand, allowing companies to hire highly qualified individuals. At Full Scale, the company fully uses the benefits of offshoring by pre-screening candidates and connecting them with clients. We provide you access to a qualified talent pool without the hassle of recruiting one yourself.
4. Time Zone Differences
Managing teams both onshore and offshore creates higher productivity. Offshore teams can cover time zones not covered by your onshore team. The continuous workflow between projects will allow you to deliver faster and increase client satisfaction.
Create a proper handover process for what to do next, and ensure you have overlapping working hours. This overlap period enables real-time collaboration, discussions, and handoffs of ongoing tasks. This strategy accelerates project timelines by maximizing productivity within the shared hours. Now, you are technically operating 24/7. Just don’t forget to encourage work-life balance practices for your teams.
5. Tax Benefits and Financial Incentives
Some countries, like the Philippines, offer tax holidays and financial incentives directed toward foreign investments. This encourages more foreign companies to invest in the workforce, provide opportunities, and stimulate business growth.
Creating more jobs at the offshore location and returning earnings to the investing country also helps both economies thrive. You maximize profit when your offshore company earns revenue paired with these offshoring benefits. It is one of the most far-reaching advantages of offshoring.
6. Better Control Over Operations
There are two options if you want to hire globally. You can either outsource talent or hire offshore. With offshoring, you don’t need to hand over business operations. In contrast, business operations are limited by outsourcing. You must know the difference between both, especially if you are planning to build a global team.
One of the best advantages of offshoring is it allows you liberty and control over your team. You can opt to train your staff or provide instructions to your offshoring partner. Ultimately, you have complete control over the tasks while the offshore partner delivers your requirements.
7. Sustainable Scalability
Growing your business requires focus and strategic planning, not to mention challenging. You must be smart about spending your money, especially when hiring employees.
Let’s say your software team is in a sprint with one left. This affects project timelines, so you must adjust and replace that employee quickly. Your team should allocate the work between themselves while you’re looking for a replacement. Not only that, your recruitment team needs to find someone, train, and deploy.
You see, if you are looking and hiring candidates yourself, you spend a lot of money maintaining the recruitment team. Partnering up with an offshoring company will help solve this scenario quickly.
Offshoring companies have a database of pre-qualified candidates for their clients. When one employee leaves, they already have a backup candidate with the right skill set. That saves you much money and effort compared to maintaining your HR and recruitment team.
You can shift your focus to business initiatives by working with offshoring partners. In effect, scaling your business becomes more manageable.
8. No Retraining
Uninterrupted work helps teams be more efficient and productive. When hiring offshore, you choose the team that works solely for you. It is similar to an in-house team; the only difference is they’re not in the same location. Some would say it is one of the advantages of offshoring, as you don’t have to deal with personality clashes.
When you assign new projects to your offshore team, they know how to fulfill the task. Once you have trained your offshore staff, you only need to nurture and hone their skills. Continuous learning helps keep them updated with trends and new technologies to serve your clients better.
9. Opening Up Opportunities in New Locations
Among the best offshoring advantages is exploring new opportunities in that country. Your labor force can help you find a new market or perspective. Culture also influences how you can better connect with this new market.
Offshore teams can better understand people in the location and give you an insight into the buyer persona. With their help and input, you can identify where to invest in your next business venture.
10. English Language Proficiency
Communication is an essential part of collaborating with your offshore team. With that in mind, you should choose the best country with high English language proficiency.
The Philippines ranks 18th out of 112 countries globally regarding language proficiency. We know that nearly half of the offshoring market comes from English-speaking countries. We want our team to communicate with their clients with ease. This high language proficiency rate is one of the reasons why we choose to hire our developers here.
Disadvantages of Offshoring
As much as companies obtain many benefits when they offshore their business processes to other countries, there are also some disadvantages. Below are some of these disadvantages:
1. Language and communication barriers
Many offshoring countries use English as an official language in business and government transactions. However, workers in offshore countries and their foreign counterparts have different degrees of depth and understanding of English. Theaccent can also be a challengewhen offshore employees come from a region with a strong local accent and have to talk to foreigners with distinguished accents.
2. Cultural and social issues
Offshore countries havecultural and social customsthat are very different from the countries of the originating companies. For example, an American executive may talk candidly and outspokenly, while his Filipino employees are more reserved and not used to the frank communication approach. Both parties may miscommunicate what they intend to say to each other, which could lead to misunderstanding. Among the pros and cons of offshoring, this is one that many companies feel concerned.
3. Quality control problems
For manufacturing offshoring, ensuring that a product is strictly builtaccording to the parent company’s standardsmay be challenging under the offshore location’s manufacturing setup. Even if the parent company provides quality guidelines, the differences in working culture, language, logistics, and supply chains of the country where the factory is located may affect the quality of the finished product.
4. Time zone adjustments
Thetime zone differencesbetween the home and host countries might go either way in the pros and cons of offshoring. Some find that to be an advantage because operations can go 24/7. However, it can also be a problem. It can be challenging for the management in both countries to organize shift patterns that are not disruptive for both sides.
The gaps in communication times could also affect the decision-making process. For example, the offshore country needs to make an important decision about a project, but it cannot move forward without consulting with the home country. The time it takes to wait and get a decision could affect urgent tasks that are time-sensitive and deadline-driven.
How to Choose the Right Offshoring Location
There are a lot of offshore locations that you can consider. But how can you choose the right one? Here are some questions that you need to answer before deciding where to hire offshore:
- How many developers do I need to complete my project in a specified timeline?
- Will my offshore team understand the requirements and priorities defined during onboarding?
- How much will it cost me?
- Is there a high availability of qualified programmers in the location?
- How much time will I spend training my offshore team?
Knowing the answers to these simple questions will help you filter out which locations are favorable to you. Finding a reliable offshore company is one way to make your offshoring journey effortless.
Find out the Advantages of Offshoring with Full Scale
We know that finding and hiring the right developers is challenging. That’s why we built our company to help find the right solutions to the U.S. IT talent shortage. We already did a big chunk of the work for you.
At Full Scale, we actively seek new additions to our team who are qualified to serve our clients. Candidates undergo a rigorous hiring process and assessment to ensure they have the right skills for the job. All you need to do is choose from our pool of developers and set up an interview. It’s that simple.
Experience the advantage of offshoring yourself. Work with us and shift your focus on your business strategies to help you grow. Set an appointment here so we can provide options on how we can help you reach your big business goals.
