Offshore outsourcing involves contracting a third party based in a distant country. Here’s how it compares to nearshore and onshore outsourcing.
The demand for outsourcing has grown in recent years, especially for services such as customer support and software quality assurance. In part, that’s because companies want to reduce costs by having some of their core business functions performed in lower cost of living areas.
But it’s also because hiring has become very competitive, and local talent can be difficult to find in certain industries. If you need a third party to help with your operations, you’ll probably consider offshore outsourcing services.
Let’s take a close look at how offshore outsourcing works and how it compares to onshore and nearshore models.
Offshore outsourcing is the practice of hiring a third party in an overseas country to perform specific business activities. This is different from offshoring, in which a business moves its entire operations to an offshore location to benefit from lower labor costs or operational costs in another country or to receive more favorable tax treatment.
With offshore outsourcing, a company remains based in its original country, but works with an overseas service provider to handle a specific subset of the company’s operations.
Some companies turn to offshore outsourcing in order to access a global talent pool when they’re having trouble hiring top-tier candidates at home. For example, a business located in the US may contract with a call center in the Philippines to provide customer support services.
One of the major benefits of hiring an offshore team working in a different time zone is that you can offer customer support during more hours. Having a team on the other side of the world answering phone calls and emails means you can offer customers overnight support without having to staff a “third shift.”
Outsourcing can also simplify tax and payroll issues, since you won’t hire overseas employees directly. Typically, you’ll pay a third-party service who acts as the intermediary between your company and your offshore associates.
Offshore outsourcing can take many forms depending on your business model. It could be as simple as hiring a web development team for a one-time project, or it could be an ongoing relationship with a customer support-specialized business process outsourcing (BPO) company. It’s also common for companies without their own information technology (IT) department to outsource their IT services to a third party.
Smaller companies may benefit from on-demand outsourcing, in which support agents are shared with other companies and paid by the hour, while larger companies may prefer a dedicated customer service team with a flat monthly rate per associate.
In addition to offshore outsourcing, there are two other options to consider, onshore outsourcing and nearshore outsourcing. Let’s compare offshore outsourcing to each:
With onshore outsourcing, you’ll still hire an external team to take over some aspects of your business operations, but that team will be based in the same country as your company. For example, a company based in New York or San Francisco may hire a third party to handle customer support services in Austin, TX or Cincinnati, OH.
Affordability is a considerable advantage of offshore outsourcing. For example, contracting with a call center in a developing country may offer you more cost savings than opening a call center at home. However, as remote workers move to areas with a lower cost of living, onshore outsourcing can cut down on the cost of office space in major cities, too.
You should also consider the potential advantage of having more teams in different time zones. If your home team is struggling to offer round-the-clock coverage, offshore teams can help you with a follow-the-sun model.
On the other hand, time zone differences can be a challenge if you need to hop on a call with your third-party provider. For example, you may find it helpful if outsourced software development services work similar hours as your in-house employees so you can discuss and collaborate on potential new features.
Lastly, onshore outsourcing tends to have fewer cultural barriers, which can make it easier to work with your team or learn the nuances of working with local customers.
If you’re thinking of using business process outsourcing, you don’t have to choose between your own backyard and a faraway country. There’s a third option: nearshore outsourcing.
With this option, you’ll still obtain services from a different country that’s in a nearby time zone or your region. Companies located in the US might choose a nearshore outsourcing team in Honduras or other Latin American countries, while companies in Western Europe might choose one in Eastern Europe like Romania.
The idea is that by hiring a team in a nearby country, they’ll be able to provide a more consistent customer experience by operating in a similar time zone and having potentially fewer cultural differences.
However, if you’re looking for 24/7 customer support, you’ll need to seek associates from many different time zones.
In today’s world of remote work and digital commerce, businesses aren’t limited to hiring workers in their immediate vicinity – or even in their home country. Offshore outsourcing makes it possible to work with teams from nearly anywhere in the world.
This form of outsourcing allows companies to access highly skilled talent pools across multiple time zones, often at a reduced cost, and with a high degree of English-language proficiency.
However, offshore outsourcing can be perceived as taking advantage of low labor costs in developing countries. Additionally, customers may be unsure whether their personal data or intellectual property will be safe with a third party in another country.
Ideally, your associates will function as a seamless part of your team, so look for a BPO company with low turnover rates and strong leadership. Always ask your vendor about their recruiting practices. Check if you can directly speak to frontline employees before signing a contract.
Offshore outsourcing helps you complete core business activities by hiring an external team. Onshore and nearshore outsourcing can be effective options too. It’s important to evaluate your needs and decide which option is the best fit. Remember: you can always mix models by contracting with associates in multiple countries.
At PartnerHero, we offer all three types of outsourcing. Our skilled associates are located across the world, in countries including the US, the Philippines, South Africa, Romania, Honduras, and we have remote team members in more than a dozen other countries.
Whether you want your offshore team to be based halfway around the world or a short flight away, we fairly pay all our customer support partners, and we ensure all partners meet our standards for English proficiency. Our programs are designed to scale with your business as it grows and can handle seasonal increases in volume.
Contact us today to learn more about our outsourcing services and how we can help you grow your team.
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