Similarly, other areas of your business, in which there is a corresponding lack of skills in your home market may also be worth offshoring. By doing this, your business will benefit from a more qualified labor force. Despite the economic benefits of offshoring, it does come with a slightly tainted reputation. This means that the financial risk involved in offshoring is higher than that of outsourcing. Local market knowledge gives your business access to multiple suppliers, leading to increased access to a wider range of resources, as well as better prices.

How to Conduct Offshoring

With Time Doctor, you can track how much time your offshored employees spent on each task and generate accurate reports for productivity and payroll management. Instead of hiring foreign workers, an onshore company employs local workers. You move business activities to states/provinces that can help you cut costs.

Negative image due to a loss of domestic jobs

FactorsOffshoringOutsourcingNature of workCompanies shift their business operations to a foreign country where the cost of living is lower. When it comes to other services like human resource management, companies often choose to outsource it to contractors rather than perform offshoring. Popular banking companies such as Citi and IBM have offshored their IT services to developing countries such as India. JP Morgan has been engaged in offshore development from way back in 2005. It includes accounting, customer service like call center services, business process outsourcing , and Information Technology offshoring services.

You’ll want to nail down these things before the vendor takes action. Knowing the expected availability, performance goals, security requirements, and so on are critical to the project’s success. The bottom line is that the true cost of offshoring is more than hourly rates. Handle office administration tasks like printing, document sharing with tools such as Docusign or Hellosign.

Key differences between offshoring and outsourcing

Another advantage you should consider when reviewing the pros and cons of offshoring is the ability to more easily reach new markets. In the previous example, we talked about offshoring marketing operations to a marketing agency in Latin America. This would be an example of using offshoring to more easily reach new markets. Well, as you will soon find out as we go through the offshoring pros and cons, you can save a lot of capital by offshoring.

How to Conduct Offshoring

Organize projects into Gantt charts that the entire team can access. Easy screen-sharing option that allows multiple participants to share their screens at the same time. Slack is an instant messaging platform which is great if you need to send quick messages to your offshore or remote team.

Top 10 mistakes to avoid with legal process outsourcing

If your company has been thinking about outsourcing any of your processes, you’re probably interested in learning about any offshoring pros and cons that could impact your decision. Similarly, if you’re looking to gain access to better raw material prices, via local knowledge of the market, then selecting a country that exports these raw materials would be a key consideration. As previously mentioned, one of the benefits of offshoring your operations is that it gives your business a permanent foothold in foreign markets. Offshore outsourcing is the process by which a business hires a third-party outsourcing company to manage a certain part of its operations.

How to Conduct Offshoring

But in this case, western companies will have to work across more than a five-hour time difference with their offshore partners. However, offshoring comes with some inevitable challenges that could pose significant risks to your business. But from communication delays to security risks, offshoring can have some potential negative effects on your business.

Inhouse Vs outsourced software development

To ascertain structural risk , companies should look at how precise their quality metrics are, as well as the extent to which the execution of processes can be monitered. You can use Time Doctor to gauge the productivity of your offshore staff using real-time analytics and comprehensive reports. Based on these insights, you can take steps to improve your employees’ performance and make other strategic improvements. If you want to gain insights into your remote workers’ performance, you need a powerful productivity management app like Time Doctor. This is a cost saving strategy that helps you simultaneously explore both the advantages of offshoring and outsourcing. Nearshoring involves offshoring services to a nearby offshore country.

  • The legislation that could affect most other CIOs, however, is in the form of disincentives and obstacles, not outright bans.
  • In addition to the lower labour cost, offshoring can also reduce or even eliminate the cost of recruitment.
  • The American multinational giant had hopped on the offshoring train way back in 2000 – investing a whopping $150 million+ in Cisco’s research and development center in Bangalore, India.
  • Finally, another advantage of offshoring is that it can help with human resources issues like motivation and overall job satisfaction.
  • But if you look at the big picture – investing $100,000 in your home country might translate to $90,000-95,000 in the offshore region.
  • Commonly offshored activities range from manufacturing to accounting and administrative tasks.

The most stereotypical perception of outsourcing is that it costs less but is risky in ROI. As with any other business, if approached diligently, outsourcing can actually help a lot. When choosing organizational forms, companies have to trade off the control and quality they bring to the table with the scale economies and gains from the specialization that providers offer.

History of Offshoring: How It All Started

Once you’ve decided the areas of operation you wish to offshore, the second step is deciding on the location they will be offshored to. These aspects are all highly digitisable, and local labor can be quickly and easily trained to meet the tasks. When these conversions are done regularly, you could lose a lot in fees.

Some tools help foster long-distance collaboration with your outsourcing partner, while others allow you to monitor your offshore team’s performance. Combine this with time differences and language barriers, and it’s a real management challenge. We’ve listed some processes that, our research shows, fall into each category. A company relocates its operations from expensive locations to a more affordable offshoring destination in a developing country.

Example of offshoring

Companies should transfer processes that possess high levels of operational risk to nearby countries rather than to distant overseas locations. When the operational risk is very high, setting up captive centers locally is often the best solution. Outsourcing is less attractive offshore meaning in software in the case of processes with moderate or high structural risk; here, other forms of governance, such as joint ventures and captive centers, become better options. In the case of processes that have very high levels of structural risk, outsourcing isn’t feasible.