Pros and Cons of Offshore Outsourcing in 2023
Like humans, businesses also depend on one another for survival. Companies cannot operate and thrive in isolation and eventually have to resort to help from third parties and agencies. But why exactly do companies depend on others for their survival and success? There may be many situations that call for help and convince organizations to seek help from third parties and external resources. It is called offshore outsourcing, where some companies even turn to foreign countries to handle their business matters and operations. It is primarily because of talent shortage, lack of funds and resources, or business optimization challenges.
Offshore outsourcing is a common business strategy that helps to optimize business operations, productivity, and resource efficiency. The results are quite compelling and impressive. This is the very reason why companies are drawing toward this trend of hiring external resources from foreign countries. Especially with modern technology and the availability of information, seeking consulting services or guidance from external resources is easier and more accessible. Outsourcing strategy adds flexibility to business operations, cuts down additional costs and mundane processes, and boosts productivity. This is your chance to learn about the pros and cons of offshore outsourcing to help you decide your business trajectory. Let’s have a clear look at some of the vital advantages and disadvantages of this strategy, but first, we will discuss the fundamentals of offshore outsourcing.
What is Offshore Outsourcing?
Also known as offshoring, this strategy refers to outsourcing work or projects to a foreign company that has expertise in specific tasks that you seek consultation on. A foreign country in another land will take up your projects outside your country via online communication at a cheaper rate. These foreign companies have knowledge in addition to expertise and skills that your company otherwise lacks.
Sometimes buying facilities such as skills outside your country is cheaper because the cost of labor varies from country to country. Maybe the labor cost in your country is higher, and your company cannot afford the cost of resources and facilities for production. It is one of the many reasons why companies choose to opt for offshore outsourcing.
What are the Benefits of Offshoring?
1. International Resource Pool and Talent
Recruiting tech resources from foreign lands is beneficial because it provides international perspective, insight, and expertise in your company matters. An international resource will bring a fresher look and opinion to the table. And going to foreign countries means your resource and talent pool widens too because you are no longer constrained by the borders of the local market. When you move your business to new geographical locations, you can access a larger talent pool with proven expertise, skills, and experience.
2. Opportunities for Diversifying Operations
High scalability and increased diversification are plus points for your business when you opt for offshore outsourcing in IT staff augmentation. More the merrier approach will help you scale your business operations and activities through a diversified pool of resources. You can extend your activities in pursuit of new employees. You will have access to a larger number of resources in a shorter time.
3. Attention to Business Development
In addition to cost and talent pool, focus on business-crucial matters is a huge benefit of offshore outsourcing. When a business adds an eternal resource in the company for tech tasks and projects, it relieves other resources and staff to work on business development activities. The in-house resources will now focus and concentrate entirely on business-intensive matters like decision-making, problem-solving, etc.
What is the Downside of Offshoring?
1. Language Barrier
Seeking help from external countries may lead to miscommunication or an inability to understand because of the language barrier. An American company hiring a Chinese native would face a language barrier and may have decreased communication efficiency. It could impact business relations and operations.
2. Cultural Differences
It may arise due to offshore outsourcing as it tends to weaken rapport. Cultural differences may also affect relationships and effective cooperation. When there are conflicting values and norms in a place, it will be projected in performance and subordination.
3. Time difference
The biggest barrier nowadays with offshoring is the time difference. A person sitting in India working for an American firm will definitely have a huge time difference, and it could showcase employee productivity. Employees may have to work late night shifts, and sometimes the company may not receive updates or responses from employees because of time lag.
Despite all the pros and cons, offshore outsourcing is still a promising practice, and many companies opt for it. Startups and small businesses prefer this idea over staff augmentation or other forms of outsourcing because it is relatively cheaper. What are your thoughts on offshoring?