Everything you need to know about offshoring Part 1

Offshoring is when you create an extension of your team or business in another country. For example, if you operate a business in the U.S., Canada or Australia, and you need to expand, rather than renting or buying a new premises or recruiting new employees locally, an option would be to source overseas talent to supplement your local capabilities.

How is offshoring disrupting business today?

Everybody’s talking about offshoring lately. And with good reason; it’s one of the most exciting opportunities in the market, and it’s disrupting businesses at every level.

Here are some ways you can use offshoring to disrupt your industry:

You can cut costs significantly
You can grow your team and scale faster
You can remain competitive in a globalized market, and offer more affordable pricing to your customers
You can compete in a bigger playing field if you’re a small-medium business
And no matter how big or small you are, you can improve efficiencies and increase your profits.

If offshoring is an appropriate model for your business the best time to start offshoring is right now. You’re ideally positioned to join the disruption and get the benefits (before your competitors do).

The four different offshoring models: pros and cons

This is where you pay a freelancer overseas to complete a project for you. You might use this offshoring model if you’re working with a limited budget, because an overseas contractor can be significantly more affordable than their local counterparts with the same skills.

The key thing to note here is that your freelancer is not full-time or dedicated to your business. While they complete your projects or retainer work, they’ll also work for other businesses and projects. Think of them as an overseas contractor.

This is where you physically go to another country yourself, and incorporate a company to function as an offshore division of your business. Where you do all the setup yourself including incorporation, facilities, security, infrastructure, telecommunications, recruitment, HR and payroll. Plus you manage day-to-day work quality and productivity.

This model of offshoring involves:

Creating your own incorporated company in another country
Paying tax in that country
Finding an office
Setting up computers, internet access, phones, furniture, etc.
Researching and abiding by local labor laws
Recruiting qualified staff members for each position
With this approach to offshoring, you’re responsible for every element of hiring, managing, and running your business. Just as you are with your onshore team.

This is where you set up a dedicated team overseas, where labor is up to 70% cheaper. But you get a local specialist to handle facilities, recruitment, HR, IT support, legal knowledge and infrastructure, so you can focus on what you’re good at: day-to-day work quality and productivity.

You retain full control of your business processes, and fully integrate your offshore team into your business. Much as you manage your existing onshore team. Managed services offshoring means you get an experienced partner on the ground to handle basically everything your offshore team needs. And you supply the systems and processes to ensure high quality work and productivity. It’s up to you how you manage your offshore team.

This is the model that MicroSourcing uses.

Which offshoring model is right for you?

While most businesses can benefit from some kind of offshoring, it’s definitely not the right model for every business. There are potential savings and benefits, but you need to commit time and effort to making it work. You need systems and processes so your offshore team can confidently work in your business. And you need to make sure your business is a good fit for the model.

What to consider when choosing the right model for you:

Whether you’re planning to outsource a project or an ongoing task/process
Whether you need full-time, part-time or freelance contract staff
Whether you need local knowledge or access
The level of skills and experience you need
What type of infrastructure and resources you can provide
How you plan to task and manage your team, and how they’ll interact and connect with your onshore team
How much (and on what basis) you plan to pay your outsourced team members, whether it’s per project or per hour.

If you only need work for projects here and there, or you only need someone to work part-time for you, you don’t need a dedicated offshore team. At least, not yet. But if you need full-time, dedicated staff and want to partner with a trusted partner on the ground, it’ll be one of the best things you do for your business.

A smart way to increase profits in your business is to cut your expenses in a way that won’t negatively impact your revenue. So look at your numbers. Find out exactly how your business is performing and what your biggest expenses are. If you’re like most businesses, you’ll already know, without looking, that your biggest expense is labor.

Offshoring has opened up an exciting new opportunity for many businesses to significantly lower their labor costs, without losing skills or impacting quality. Offshoring can also reduce your onshore fixed costs. A lot of business owners take fixed costs (like rent, facilities, electricity, and so on) for granted. But these costs definitely matter, especially if you’re trying to scale your business.

The Philippines has a very similar culture to the U.S. Culturally, Filipinos are quite similar to Americans:

They’re very loyal and honest
They’re very accountable to their commitments
Most speak fluent English
They’re extremely hospitable
And they tend to value their jobs highly.

Many businesses are concerned about offshoring to the Philippines because they believe the technology won’t be up to the high standards of Western countries. That’s a myth. In fact, the Philippines has very similar technology to the U.S.

The Filipino government invests heavily in infrastructure, particularly in the cities; Manila, for example, which is a home to a lot of large corporate facilities. The main thing to be aware of when offshoring to the Philippines is the typhoons that come through every year. This can cause outages for businesses that aren’t prepared. When looking for an offshore partner, look for one who has invested in world-class redundancy infrastructure and business continuity processes - a partner who can quickly and affordably move teams and facilities to entirely different buildings if necessary. This means maximum uptime for business operations, even during natural disasters.

Offshoring:

What you need to know

How is offshoring disrupting business today?

The four different offshoring models: pros and cons

Project-based outsourcing

PROS

CONS

THIS MODEL IS BEST SUITED FOR

Traditional outsourcing (Business Process Outsourcing/BPO)

PROS

CONS

THIS MODEL IS BEST SUITED FOR

Incorporating your business offshore

PROS

CONS

THIS MODEL IS BEST SUITED FOR

Managed services offshoring

PROS

CONS

THIS MODEL IS BEST SUITED FOR

Which offshoring model is right for you?

How much can your business save by offshoring?

Why choose the Philippines as your offshore location?

What’s next