What is an Offshoring Strategy and How to Build Yours?

Offshoring is a business strategy involving companies relocating specific areas of their operations to another country for cost efficiency or access to a wider labor pool. There are many reasons businesses choose to offshore their business functions, such as accounting, customer service, or IT operations. But ultimately, the goal is to have access to quality talent with the required skills and expertise while also saving money. 

With today’s challenging business environment, an offshoring strategy is an excellent solution for global talent shortage. As more businesses grow receptive to hiring foreign talent, building an offshore team is also becoming convenient and accessible. 

In this article, we discuss the top reasons for offshoring your business functions and how to build an offshoring strategy for growth.

Top 3 Reasons for Offshoring Your Business

Although there are offshoring advantages and disadvantages, the benefits of offshoring can’t be stressed enough. Here’s why you should consider offshoring as a growth strategy for your business. 

Save on Labor Costs and Operating Expenses 

One of the main reasons businesses offshore their functions to other countries with lower labor costs is cost reduction, according to this 2023 survey by Deloitte. The survey says that business leaders reduce costs as a way to combat the changing global economic dynamics.

These significant reductions in your operational expenses allow you to reallocate your resources to other crucial areas of your operations, such as business development, training, and research.

With these cost reductions, your business becomes more financially sustainable and more efficient, allowing you to price your products or services better and achieve more positive results.

Bear in mind though that while offshoring does make you save on costs, it doesn’t mean you get cheap labor. It just means that you get the same quality talent as if you’re hiring in-house but at more sustainable costs.

See also: Discover how much you’ll save when you offshore talent to the Philippines!

Access a Highly Skilled Global Talent Pool 

All over the world, shortages of skilled and qualified professionals affect many businesses. According to ManpowerGroup, a whopping 75% of employers globally are having challenges in filling roles in 2024. 

Offshoring helps solve this problem.

Because you’re not limited to hiring in your home country, offshoring enables you to tap into a global talent pool of highly skilled professionals. A trusted partner in an offshore location will handle the entire recruitment process and hire qualified professionals for your company’s critical roles.

Take Advantage of Extended Business Hours 

An offshore team operating in a different time zone allows your business to operate 24/7. Work continues in your offshore team even when you’re done for the day. 

These extended operating hours mean continuous workflow, increased productivity, and more efficient customer service. In a short period, you can gain new clients, expand your market coverage, and achieve a positive return on investment.

How to Build an Offshoring Strategy

A successful offshoring strategy requires research and careful planning. Many factors have to be considered when finding the right offshore partner to match your business needs and values. Here are essential things to note to get you started. 

Identify Which Business Functions to Offshore 

Determining which parts of your business to offshore is the first and most crucial step in any offshoring strategy framework. Assess how each business process contributes to the overall business. The more critical they are to your business operations, the more you should consider keeping them in-house instead of offshoring them. The less critical functions, however, can be moved to an offshoring partner so that you can focus on your business’ core functions. 

For example, a business producing consumer goods will prioritize product development over customer service, so it can offshore its customer support operations. However, companies in the hospitality industry where customer service is one of the major business drivers can have in-house customer service operations, and the IT function can be offshored instead.

Identify the Offshoring Risks and Challenges for Your Business 

Offshoring has numerous advantages, but also consider all the operational and structural challenges of offshoring. 

You night encounter operational challenges with team members, customers, technology, and regulatory demands. There may also be structural challenges when your offshoring partner can’t meet expectations or deliver the quality promised.   

You can significantly reduce or avoid these risks and challenges altogether when you work with a trusted and experienced offshoring partner to streamline your processes and anticipate, manage, and evaluate risks.

Read more: Offshore Staffing Trends in 2024: KPO, Automation, and More

Understand How the Offshore Model Works

Learn how the offshoring model works and how it can help achieve your objectives and get the support your business requires. With a dedicated offshore provider, you can collaborate and have complete control over the costs and the initial stages, from hiring and training to scaling,  including the quality of the people who will work for you. 

Choose the Best Offshore Location 

The best offshoring strategy entails choosing the best offshore location. Aside from cost savings of as much as 75%, you must consider value, flexibility, expertise, and cultural compatibility when choosing your offshore location. 

The Philippines ticks many boxes on the list of what to look for in an offshore partner and offers various offshoring benefits to global businesses. 

For one, the country produces around 1.6 million college graduates annually.  The Philippines also has a high proficiency rating in its grasp of the English language, as per the 2023 English Proficiency Index, ranking second among 23 Asian nations and 20th out of 113 countries worldwide. 

Moreover, the Philippines has a large pool of highly skilled talents and experienced professionals with strong work ethics. They can competently perform crucial roles in your organization, from recruitment, finance, training, and customer service to IT and research and development.

Build Your Offshore Team 

As demand for highly skilled talent increases, talent gaps in organizations also become increasingly common. To ensure your workforce has the capabilities it needs, conduct a talent gap analysis. 

Start by defining your organizational goals or business objectives and determining the necessary skills to make these goals and objectives a reality. An offshoring partner with a diverse strategy can help you evaluate, interview, and hire talents based on their skills and expertise and draw up job tailor-fit descriptions that meet your specific requirements for each role.

Work with an offshore partner to build an effective offshore team that will provide top-notch customer service, increase your service capacity, and scale your operations. 

An offshore team allows you to operate 24/7, provide round-the-clock support, and meet high demands, ultimately giving you business flexibility and a competitive advantage.  

Review Your Offshoring Contract 

Your contract ensures protection, accountability, and clarity between you and your offshore partner. Ensure that it accurately identifies the parties involved and the role and responsibility of each. 

It should also outline the terms and agreements, pricing, services, and duration of services. If there’s anything unclear, discuss it with your offshore partner before finalizing the contract.

Build a Relationship with Your Offshore Team

Good communication and collaboration don’t just happen. Once your offshore team is set up, get to know your team members better to build a positive and harmonious relationship. 

You must be more visible during the initial stages by doing in-person check-ins. As your team starts working remotely, it will be an excellent exercise to have weekly catch-ups to monitor the progress of various projects, discuss blockers, and provide quick feedback. 

These sessions can help you gain valuable insights regarding your team’s performance, experience, and engagement. You can identify areas for improvement and find opportunities for business expansion. 

More importantly, you can track the performance of your offshoring strategy using key performance indicators like cost savings, productivity, quality, employee engagement, and customer satisfaction. 

See also: Hiring and Working With Offshore Teams: Know the Real Deal

Final Thoughts

There are many compelling reasons to adopt offshoring as a growth strategy. A well-planned and well-executed offshoring strategy can help your business thrive and scale up quickly. 

But before you kickstart your offshoring journey, know that it’s not suited for all functions and all types of business. However, you can mitigate the risks and understand how offshoring works by partnering with an experienced and reliable offshore company.