There are tons of learning resources out there that talk about onshore vs offshore outsourcing. But most of them, if not outdated, pit these two approaches against each other. Not understanding that these two serve different business needs.
In this blog article, we will steer clear of discussing which one is better. Instead, we will discuss their key differences for unique business challenges. After reading this blog, we promise to provide you a clear roadmap to your first step towards outsourcing.
What is the difference between onshore and offshore outsourcing?
Businesses often select one of two approaches to outsourcing: onshoring or offshoring. Therefore, it's critical to comprehend their primary distinctions. To begin, let us first define the phrases onshore and offshore outsourcing.
Onshore outsourcing is also known as domestic outsourcing. It means outsourcing for external help but within your own country.
For example, if your company is based in the US and you hire a customer support team in the US, then it's onshoring at its finest.
Unlike offshore outsourcing, onshore outsourcing allows for greater control and closer communication between you and your service provider.
In contrast, offshore outsourcing refers to the use of overseas labor. Simply put, it is the process of moving your business processes abroad.
For example, if your firm is based in Canada and you expand your business in a developing country like the Philippines, then that's offshore outsourcing. This approach to outsourcing fits those who want to cut costs.
Pros and Cons: Onshore vs Offshore Outsourcing
Knowing the pros and cons of onshore and offshore outsourcing will help you decide which one could work for your business. Here are the comparative aspects to consider regarding whether to onshore or offshore.
Value for pricing
When venturing into outsourcing, the first thing that businesses inquire about is cost-effectiveness. So which between onshore and offshore services can help you cut costs?
For many reasons, the labor costs of offshore locations can be much less than onshore locations. Why? Let's look at certain production parameters, such as salaries.
If you are from a country with expensive labor, then you will find offshore outsourcing to be much more cost-effective.
When you offshore, you can take advantage of the lower wage rates in developing countries. For example, companies that hire employees in the Philippines can save up to 15% on their IT expenses.
We hate to break it to you, but onshoring means paying more. If you operate in a country with high tax rates, hiring an onshore company may hurt your bottom line.
Communication
Collaborating with an onshore team is much easier than an offshore team. Suppose you want to work with a team that understands your country's business environment. In that case, onshore outsourcing is ideal for you.
Offshoring, while deemed cost-effective, can pose challenges such as cultural differences and language barriers. In addition, when transferring operations abroad, multiple communication issues arise.
Therefore, you should consider cultural compatibility and language proficiency when choosing an offshore team.
If you are from an English-speaking country, you will definitely love the Philippines. Western culture is deeply ingrained in this country. Plus, they have a natural affinity with the English language. You can train them to match your work culture and speak with a specific accent.
Speed of execution
Meeting deadlines is as important as the costs. Of course, you want to work with a team that can deliver results at a fast turnaround time.
Because of low direct labor expenses, offshore companies have more flexibility in gathering resources ahead of a project. They also have robust manpower to ensure no deadlines are ever missed.
On the other hand, onshoring companies cannot afford to have idle resources. They must engage and train their staff to carry out new projects. Too often, they fail to adhere to the promised quality and timeliness.
Remember that a slow turnaround time can lead to major bottlenecks. Hence, when it comes to time-sensitive projects, go for the one that can meet your deadlines. Make sure they have a backup plan should they miss a deadline.
Quality assurance
When it comes to quality control, it's easy to solve issues with onshore outsourcing. If you want to teach a remote staff to do something specific, it's best to meet in person to grasp what's needed.
But if you are after quality work, offshore outsourcing is your best partner. Offshore companies claim to have qualified professionals who can accomplish the essential task.
Offshore companies allow you to access a global pool of talent. You can take advantage of their domain expertise and experience working with foreign clients. They also have the latest technologies for seamless handling of your business functions.
Operational risk
There's an inherent risk in entrusting your operations to a service provider. Clearly, both onshore and offshore outsourcing present operational risks. But there are ways to reduce or eliminate these risks.
When outsourcing, find a company that has effective risk management plans. Also, select a company with established quality standards and performance indicators. There should also be timelines and benchmarks to ensure you meet your goals.
Moreover, make sure your company's information remains private. There may be times when you must grant your service provider access to intranet sites and other sensitive corporate data. It is in your best interest to sign agreements to preserve the confidentiality of your data.
Final Word: Onshore vs Offshore Outsourcing
Now that we have shed light on the debate onshore vs offshore outsourcing, it's time to consider your needs. You may want to talk to us because it's risky to make decisions without advice from experts.
KDCI has been in the offshore staffing industry for more than ten years. We have a wide range of offshore staffing services to help you acquire top talents in your company. Did we mention that we operate in the Philippines—the world's leading outsourcing destination? Yes! We have Filipino employees waiting to work with you.
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