Advantages and Disadvantages of Offshore Outsourcing
Offshore outsourcing is a way by which businesses continue to work in an increasingly interconnected world. There are many ways by which you can delegate tasks so they get completed on time. You might already be familiar with those ways:
- Offshore outsourcing
- Onshore outsourcing
- Nearshore outsourcing
This is apart from the in-house teams that companies already engage, to save time, money, and resources, they prefer to outsource. In an earlier article, we discussed the advantages and disadvantages of nearshore outsourcing, a technique where businesses delegate tasks to teams that reside in neighboring countries.
Here, we are going to talk about the benefits of offshore outsourcing and certain things you need to be careful about.
What is offshore outsourcing?
Offshore outsourcing is a technique by which businesses delegate specific business functions to external parties in distant countries. Many companies rely on this technique to supplement and complement the work done by their in-house team and save time in the process. With the pressure to meet deadlines getting stronger than ever, this is one way in which they can meet the global demand. And it is also one sure way in which they can ramp up efficiency, productivity, and focus. Businesses can be assured of reaching their goals while the main tasks will be completed by the supportive team.
The commonly outsourced tasks are software development, web and app development. Businesses in the UK and the USA have an online presence and often rely on countries like India, China, and the Philippines because of the multiple advantages that they offer.
Key advantages of offshore outsourcing
If you plan to do offshore outsourcing, then knowing these advantages will let you know it is one of the things that you must do to reach better productivity.
1. Huge cost savings
This is, of course, one of the compelling reasons why businesses do offshore outsourcing. The countries that we mentioned above have developers that work at very affordable rates. This is because the cost of labour is significantly lower when compared to developed countries. By outsourcing to other nations, businesses can save a lot on operational expenses like salaries, benefits, and overhead costs. Since the outsourced teams are not direct employees of the company, businesses have to pay them only during the contract.
2. Round-the-clock uptime
These days, projects are moving at a fast pace, and new updates on software are being released so frequently that it is virtually impossible to keep up unless you have a team working almost non-stop. And with businesses going online, there will always be customers purchasing something or the other all the time. With offshore teams, it is possible to keep up with the demands because they can continue working when your employees close for the day.
The work will go on in shifts, especially if the software has to be released quickly or if customers have to be attended to. The work goes on 24/7 whether it is for supporting the customers or updating and upgrading your software.
3. Access to specialized expertise
Going offshore outsourcing is the best option when compared to hiring experts as staff to complement your staff. When you explore outside your country, you will find more people with niche skills. You have access to a broad range of skills and expertise, so if you are looking to have people with niche knowledge or technical capabilities, casting a wider net would get the job done.
You can tap into the talents of professionals from different parts of the world and enhance the competitive edge of your business when you outsource. Sometimes, this talent may not be available locally, or your software team might not have the specialized knowledge. And with outsourcing, you can leverage niche talent.
4. Focus on core competencies
When you outsource, you will be able to delegate tasks to people who are experts in their field. That way, you don’t have to waste money or resources on hiring new people. This has enabled businesses to channelize their energy and resources on the core competencies and improve operational efficiency.
Disadvantages that are worth noting
While there are numerous advantages, it would be good to know what the multiple disadvantages are so you can work around them and lessen the effects on your projects.
1. Communication challenges
This is something you can expect when you outsource work halfway across the world. Even though the team members will be able to communicate in English, there will still be some amount of language barriers.
However, this risk is getting smaller and smaller because the team is getting exposed to English on a native level, and this leads to lesser misunderstandings. The language barrier is getting diminished among the well-educated people because they can grasp what native English speakers need. Many of them are educated abroad and will be able to relate to the language better. However, there are still some people who are struggling to grasp the language, and this could result in delays, errors, and lack of clarity in project execution.
2. Data security and intellectual property risks
When you outsource work to someone halfway across the world, share only what’s necessary unless you know you can trust the data, intellectual property, and often, proprietary information. Make sure to not share any sensitive data because you never know where or when they might be used. When you engage in offshore outsourcing arrangements, do it with a team that you can trust, or have been doing business with them steadily and regularly. Because when something bad happens, you might never know where the leak is coming from.
3. Failing to iron out hidden costs
Just as we talked about intellectual property rights, there could be some hidden costs that might cause you to risk losing intellectual property to the company you’re outsourcing the project to. It could be computer software, design, logo, or anything.
Find out how the foreign country protects intellectual property rights; there could be foreign regulations and laws you may not be familiar with. Also, make sure there are no hidden costs before drawing the contract. It would be good to investigate the outsourcing partner a bit if you need to assure their credibility, especially if it is your first time. After all, you don’t want to find out that they had breached contracts in the past.
The decision to outsource is a good one, provided it aligns with your needs and objectives. By knowing the potential drawbacks and leveraging the advantages, it is possible to make the right decision. Offshore outsourcing is a great option when you are looking for specialised talent at affordable rates. They let you scale at will. When you establish clear communication channels, you would be able to establish strong partnerships and eliminate the threat of quality control or data security.
Offshore outsourcing is a valuable tool for businesses looking to stay ahead of the game, enhance their competitiveness and achieve long-term results. There might be some cultural differences that you need to be aware of. Once that barrier is crossed, you will have no more trouble, so do your research well.
The author: Sascha Thattil works at Software-Developer-India.com which is a part of the YUHIRO Group. YUHIRO is a German-Indian enterprise which provides programmers to IT companies, agencies and IT department.