Offshore outsourcing is a useful tool to help businesses maximize profits by reducing operational costs. In this article, we define the terms “outsourcing” and “offshoring”, explore the categories or different types of offshore outsourcing, the advantages organizations get, and discuss the five best e-commerce jobs and tasks to outsource to the Philippines.
Offshore Outsourcing Definition
In general terms, offshore outsourcing is the act of setting up an external workforce in a country other than the one where the goods or services are developed or produced. This is often done at lower labor costs, without compromising on expertise. By outsourcing an office job or project, business owners and management can have the freedom to focus on their core business.
Offshore outsourcing provides businesses advantages like access to high-quality services at significantly lower operational costs. There are two different variations to offshore outsourcing: offshoring and outsourcing. For this article, we discuss them both collectively, but we should first explore the differences between outsourcing and offshoring. Before we do this, we also look at some technical terms.
The term “offshore” refers to something that is in or occurs in a different country. So, something that is “offshore” exists overseas. The term “outsourcing” refers to moving part of the operations of a business, or even a project or tasks, to a workforce that exists in another country. Put them together, and you get offshore outsourcing.
An “offshore company” exists and sells products or services in one country, but is also registered and operates in another, or other countries. The definition of an “offshore account” is an account that exists in another country. Another definition to note is “offshore manufacturing,” which simply means that a company has moved a project or the task of production or manufacturing overseas.
Now that we have an understanding of these technical terms, we can shed a little more light on outsourcing and offshoring, and ultimately, offshore outsourcing.
Outsourcing vs Offshoring
Off-shoring is when a company decides to physically set up its business operations in a different country. An example of this is physically building a production plant in a different country to produce goods.
There are several reasons for doing this, the dominant one being the ability to produce the same goods at lower production costs.
Outsourcing on the other hand refers to relocating a certain aspect of business operation.
An example of this would be making use of an existing manufacturing plant in another country or designating office work for workers in another country.
An Example of Offshore Outsourcing
The best example of offshore outsourcing would have to be Harley-Davidson. Harley-Davidson is an iconic American company that uses offshore outsourcing for most of its work. It has built factories in Brazil, India, and Australia, recently catching the attention of President Donald Trump for issues relating to tariffs.
This is a clear indication of what a hot topic offshore outsourcing is for the American economy.
Categories in Offshore Outsourcing
There are three main categories or types of offshore outsourcing, namely business process outsourcing (BPO), infrastructure and technology outsourcing (IT), and software development.
Business Process Outsourcing
Business process outsourcing, also known as production offshoring, is a type of offshore outsourcing that entails physically relocating part of a business process. This may include the entire manufacturing task or the relocation of customer services. Business process outsourcing is done to save on the cost of labor and materials.
To better understand this, let us explore an example. If you intend to produce petroleum products but must source the raw material (in this case crude oil) from another country, it may be more cost-effective to set up a petroleum refinery in that country to save on the cost of having to have it transported to the United States.
There are two different parts to business process outsourcing, namely front office, and back-office applications. Front office solutions involve supportive business functions, such as virtual administrative assistance, technical support, help desks, telemarketing, and call centers.
Back-office solutions on the other hand have more to do with the organization’s internal roles, such as accounting and bookkeeping, human resource management, recruitment of staff, mobile and web development, and graphic design.
Infrastructure and Technology Outsourcing
Infrastructure and technology outsourcing is a type of offshore outsourcing that refers to relocating services that help support a business, such as networking, technical services, and technical support. This is often done to gain access to expertise without additional costs.
Software development is also a type of offshore outsourcing that requires a highly skilled workforce that can cost a business a great deal of money. Outsourcing this job to underdeveloped countries can get you access to software developers at lower costs. Currently, China, India, and Russia are the three leading countries in terms of outsourced software development.
With a clear indication of the categories of offshore outsourcing, we can now delve into the pros and cons of outsourcing offshore.
The Pros and Cons of Outsourcing Offshore
At first glance, offshore outsourcing may seem purely advantageous, but there is a certain setback to choosing offshoring your company services to other countries.
Here are the benefits and downsides of outsourcing offshore.
Pros to Outsourcing Offshore
It is Cheaper for your Company
The biggest and most dominant advantage to outsourcing business is the cost-saving aspect. Costs are important to companies, and by outsourcing business to under-developed countries, you can perform business operations and manufacturing at reduced rates, maximizing profits.
Businesses that practice offshore outsourcing report operational cost reductions of up to 15 percent. The reason why companies can save so much on costs and increase their profit margin is that labor operations and materials are cheaper in other countries.
Another reason why profits are higher for businesses that outsource their business processes is that they can operate more efficiently due to workload reduction and focus on raising profits instead of costs.
Outsourcing Gives You Access to Specialized Expertise
This type of outsourcing is also known as knowledge process outsourcing. Finding highly qualified individuals to join your workforce in first-world countries can be expensive and difficult. With outsourcing, you have access to experts worldwide, often at better rates.
With better skills in your workforce, you can achieve better business outcomes, and offer clients or customers better services and goods from your company.
Areas, where expertise is outsourced, include services like research and development, legal services, market research and data collection, intellectual property research, and design.
As we move into a digital age, more and more companies are being run remotely to people around the globe. This warrants the need for 24-hour services. Outsourcing offshore gives you the ability to provide customer services around the clock by making use of workers in different time zones in a way that suits your pocket and maximizes your company revenue.
You Have More Time to Focus on Core Business Functions
Core business tasks refer to the primary areas that an organization must focus on to maximize operations and profits. Offshoring can offer support here. These areas require careful examination to determine which complement each other in terms of capital needs, streams of revenue, manufacturing, and customer base. Offshoring some of your work encourages you to focus on core business functions and processes that determine success.
Outsourcing Provides Greater Speed and Efficiency
Speed and efficiency are everything in the world we live in today. Consumers are becoming more and more accustomed to having everything available at the touch of a button. Another benefit to outsourcing work is that your company can operate with greater speed and efficiency. Lower labor costs mean that you can hire a bigger workforce to get work done more quickly.
There truly are great benefits associated with offshore outsourcing, but what difficulties could accompany such a way of doing business?
Outsourcing: The Cons
You Have Less Control Over Labor Operations
The thing about having your business run elsewhere is that it is indeed run elsewhere. Operating in different countries means that you are dealing with different people who use information differently, communicate differently, and handle errors or mishaps differently.
This means that small delays can lead to huge backlogs, which could take forever to resolve, given that living in different time zones could mean a delay in communication. Therefore taking enough time to carefully sift through all bidders is so important instead of just choosing the cheapest one.
You want to work with a labor force that can follow careful guidelines and processes that you set out with little error or delay.
Challenges with Logistics
Having your workforce practice in a different location means that you may experience cultural and language barriers. Although most people around the world speak some level of English, explaining complex concepts may be challenging and warrant the need for translators or extra work on your part.
Another logistical challenge that we have touched on already is time zones. A difference in time zones could lead to delays in communication that in turn cause delays and mishaps.
The important thing here is that both parties have a clear understanding of the times that fall within working hours, no matter where they are in the world, and use those productively to convey instructions and report feedback. Establishing clear guidelines for your external workforce is paramount in overcoming these kinds of logistical challenges.
Concerns Over Public Image
Another disadvantage of offshore outsourcing is the negative image it creates for a company. Many Americans view offshore outsourcing to exploit workers in other countries to maximize profits.
Offshore outsourcing is often viewed as a reason for economic struggles because the money that should go be spent domestically on materials and labor is now being spent in other countries.
Additionally, offshore outsourcing is also viewed negatively by the public because it also reduces the number of jobs and contributes to increased rates of unemployment.
The key to overcoming this setback is being able to deal with them and find solutions. A good entrepreneur has mechanisms in place to dispel negative feelings and connotations using marketing and public assurance.
Complications with Tax and Payroll
When dealing with workers from different countries, different tax laws apply. Adapting to operating within several different tax systems may be overwhelming and require services from international tax and payroll companies. Tax management is overwhelming, so keep that in mind.
Now with a full understanding of the many advantages, as well as the challenges that accompany offshore outsourcing, we can discuss the five best jobs and processes to outsource to the Philippines.
Five Best Jobs to Outsource to the Philippines
Currently, business process outsourcing (BPOs) employs over 2 million people overseas in the Philippines across different ethnicities. BPOs help to boost this country’s economy and make it a leading competitor in the realm of BPO giants such as companies in India and China.
Over the past 10 years, BPO companies have grown by 30 percent in the Philippines. It has been predicted that the Philippines may hold a global share of 20 percent of the world’s BPOs, generating a revenue of more than 50 billion dollars.
Because of the young demographic and high level of education and communication skills, people from the Philippines are best suited for e-commerce jobs. The five best jobs to outsource to the Philippines are customer service or support, order fulfillment services, uploading items or listings, optimization sourcing, and working for marketing research companies.
But before discussing these five jobs and services, we should first consider the advantages of outsourcing work to the Philippines over places like India.
Benefits of Outsourcing to the Philippians
- BPOs done through the Philippines offer that all-important reduction in cost.
- People of the Philippines also have a neutral language. English is their official language, so most of the people are native English speakers.
- Philippians have accents like that of Americans, making them the perfect candidates for voice-based work such as customer support and call centers.
- You have better access to expertise and talent when you outsource to the Philippines because of the high level of education that the people have access to. Their education system follows that of the United States very closely and more than 450 thousand people graduate from the country’s institutions each year.
- The people of the Philippines have a younger demographic, with the average age being 23 years old. These youngsters have grown in the world of technology, having had access to a high-level education, making them the perfect candidates to carry out outsourced work.
- The Philippines ensures data privacy and security thanks to the high-security standards that conform to that of international standards.
- The Philippines have produced some of the best-rated work. Companies that use the Philippines for offshore outsourcing have reported the delivery of high-quality work and services and desirable outcomes.
Customer service and support is the act of assisting consumers to purchase goods or make use of a service. This is one of the jobs that provide the Philippines with its BPO revenue.
Because Philippians have accents like that of Americans and are well-educated, it makes them great candidates to provide service and support functions telephonically or via digital platforms.
Order fulfillment is the act of supplying a consumer with the goods that they have placed an order for. The entire process, from the point of sale to the final delivery of the goods, generally entails a lot of office work.
It requires good communication skills, something that the people of the Philippines are known for as opposed to people overseas from other countries that generally take on BPOs.
Uploading Items or Listings
As the world moves more and more into the digital age, the need for online shops and retailers is on the rise.
Uploading items and listings to these kinds of sites are functions that take manpower that can be obtained more cost-effectively through outsourcing overseas.
This type of job is also great for outsourcing to the Philippines because of the young demographic that has experience with working with technological functions, an important trait for people who are to work in the field of e-commerce.
The process of optimization sourcing utilizes a combination of computer hardware, software, and mathematical models to conduct analyses on biddings for source materials to determine which is optimal, based on the business’ preferences.
While optimization sourcing is no new concept, it has been digitalized to prevent the need for a great deal of time and resources. This business function can be carried out remotely and is often outsourced.
Outsourcing this type of work to people in the Philippines is ideal because you have access to great talent at better prices than other counties, like India.
By definition, market research is the process of collecting and processing data systematically to analyze the effect certain aspects of products or goods, as well as any changes made to them, may have on consumers.
Previously, this was done manually through physical surveys and such, but since the digital age, this can also be carried out remotely using various technology solutions. Physical oversight and recordkeeping are still necessary for this kind of job.
Outsourcing this work to the Philippines works well because of the consistently high levels of education that the workers of the Philippines offer in comparison to that of other countries that take on BPOs.
Offshore outsourcing is a great way to boost an organization’s profits and efficiency. It has several benefits: the greatest one being lower costs. Other benefits include project solutions, an organization that is working around the clock, and the possibility of being on call at any time.
Although there may be setbacks associated with offshore outsourcing, setting up clear guidelines and communicating with your offshore workers regularly and clearly regarding your expectations can help alleviate some of them.
The Philippines is a great place to outsource your e-commerce work to because of the high level of expertise you are offered, at a great cost. You also have access to a younger demographic with high levels of education and experience with technology when you choose the Philippines.
The best jobs to consider outsourcing to this resource-rich country are customer service, order fulfillment, uploading of items and/or listings, optimization sourcing, and market research. If your organization requires any of this, call and organization today to access these benefits.