The term ‘offshoring’ has gained significant momentum in the last few years. Offshoring is when a company opens a brand new office in another country, and employs a permanent, new team for their business. The only difference between your offshore and in-house teams is that your offshore team is based elsewhere and works remotely. The best part? You can offshore absolutely anything. Software, data entry, manufacturing, or even customer support.
However, moving processes offshore is a big step for any company, irrespective of its area of expertise. That’s why it’s essential to ensure that the benefits of going offshore are significant and tangible. In this blog post, we’ll look at four major benefits of building an offshore team.
1. Access to talent
The Duke CIBER/Booz Allen offshoring study conducted in 2006 examined 530 companies from Europe and the U.S who had either offshored or outsourced their processes for proven benefits. The study found that nearly three-quarters of the respondents cited ‘access to qualified personnel’ as the primary reason why they chose to build an offshore team.
Today, more than a decade later, the scenario is no different. The unemployment rate in the UK is the lowest it’s been since the 1970s, and the number of job vacancies is only rising. While one-third of the employers cite a lack of applicants as the reason, another 26% say that the candidates lack the necessary experience for the job.
By going offshore, especially to countries like the Philippines and India, you gain access to a large pool of talent. Engineers, research analysts, sales executives – you’ll always find talented individuals in the niche that you’re looking for. They not only have the necessary hard and soft skills but are also fluent in the English language.
This also means that you can scale up capacity quickly, which, in turn, allows you to take on more projects, which increases the profitability of your business.
2. Cost-effective operations
Building an offshore team in another country is usually more cost-effective than recruiting locally in the US and Western Europe. The primary reason behind this is the cost of living. For instance, the cost of living in India is roughly 63% lower than in the U.S.
This means that hiring employees, especially for labor-intensive businesses like manufacturing and service jobs can be done at a significantly lower cost. This, in turn, increases the company’s revenue and maximizes profits.
Say you establish a 5-person development team in Bangalore, along with your 5-person team at home in London. Now let’s look at two comparisons:
- Salaries only – If you hire the same team in Bangalore (same ranks, experience, and quality) then the salary difference will be substantial. Comfortably 3-4 times cheaper.
- Total cost – On average, the total cost of doing business in a country like India, including premises, administrative staff, legal work, payroll, developer salaries, etc. typically comes in at 50% the cost of your at-home developers’ salaries.
Apart from salaries, other compensations and benefits are also much lower in Eastern Europe and countries like India. Employee-centric benefits are all drops in the ocean compared to the West.
3. An opportunity to focus on your core business
Offshoring allows business owners to step away from their administrative responsibilities and focus on the core competencies of the business. On the other hand, the offshore company that you partner with takes care of setting up an office space for your team, the payroll, and other organizational duties.
This means that instead of managing sick leaves, attending to absenteeism, and uplifting employee morale, you can focus on looking for more opportunities to improve the growth of your company.
4. An opportunity to scale up sustainably
Though you may anticipate scaling your business after a couple of years, practically, it’s easier said than done. Taking on new employees, given their eye-watering salaries most of the time is a huge investment. In some cases, it’s a significant financial risk that you’re probably just not willing to take.
Why?
Firstly because, if those employees decide to leave and move onto better opportunities, you’re going to be overburdened with work that you did not anticipate coming. Other times, the quality may drop, your clients will begin to look elsewhere and your entire business is in a world of trouble.
Another common reason why it’s risky is when you cannot take on as many clients as you thought you would. You have many resources on the payroll, and they are getting paid to virtually do nothing. This situation is definitely not sustainable, and your business will only go downhill from there.
So, how can you simplify scaling?
By going offshore.
First, the cost of recruiting and paying staff is lower. At the same time, expanding your offshore team can be done much faster than in-house. Second, since the offshore team will have ample, inexpensive office space, there’s no concern over moving to a larger property.
In a nutshell, here’s what offshoring can offer for your business:
- Higher profit margins – The lower total cost of working, combined with unchanged revenue from clients, makes increasing profit straightforward with offshoring.
- Access to niche talent – The engineering marketplace in the west is facing huge scarcity: the more desirable the skillset, the harder they are to find. Offshoring provides access to this talent.
- Opportunity to scale up sustainably – Weather unexpected storms more easily, because of the reduced financial burden. At the same time, it’s possible to employ engineers and scale up extremely quickly when required.
- No administrative burden – All the benefits of offshoring, without the administrative, legal, and financial juggling.
All in all, going offshore is a great way for companies to access resources that they otherwise find impossible to conquer. Offshoring – the smartest way to scale!
