Businesses that want to keep operating expenses down and productivity high often turn to outsourcing for long-term and sustainable solutions. In Deloitte’s 2020 survey, cost reduction was identified as the top reason to outsource. This trend is likely to stick as the COVID-19 pandemic continues to take its toll on economies, forcing business owners to pivot and look for ways to cut spending while gaining access to global talent.
Beyond keeping up with financial challenges, there are many good reasons why companies choose to outsource chunks of their businesses. Let’s talk about the driving factors behind outsourcing and why some companies even prefer to move critical tasks and departments offshore.
Why Businesses Choose to Outsource
Outsourcing benefits various industries in many ways, especially with the growing trend of transitioning to cloud technology. In fact, eight out of 10 businesses intend to outsource in 2021.
Moving some jobs away from the office — or to another low-cost, high-productivity country — offers a great way for businesses to operate more seamlessly as they scale. The top reasons to outsource include:
- Cost reduction and time saving
- Capacity shifting and flexibility
- Access to market expertise
- Concentrating on core competencies
- Scaling and growth
When deciding to move certain operations to a third-party provider, the choice would be between onshoring and offshoring. Onshoring means hiring a freelancer or an agency that’s located within the city or country, while offshoring entails going out of the country to access skilled talent. For many businesses, offshoring is a practical option as it casts a wider net in the quest for expertise. In most cases, outsourcing offshore is also more cost-efficient.
Advantages of Outsourcing Offshore
Offshore outsourcing entails contracting work to a third-party in another country. It can be in the form of production offshoring, where you relocate physical processes to achieve low production costs, or services offshoring, where you move technical and administrative services, like software development, finance, and human resources. For this article, let’s focus on the reasons to outsource services offshore.
1. Lower cost of labor
The high cost of living in the U.S. makes it difficult to find skilled labor at reasonable rates. The top offshoring locations — like India, China, and the Philippines — offer a large pool of talent at a lower cost. For example, a web developer’s salary in the U.S. averages $60,257 per year, whereas the same skilled individual in India would cost around $4,200 (₹310,860) per year. If you partner with an offshoring service provider, you can eliminate the cost of recruitment, as well.
2. Higher profit margins
Operating a team of five IT experts in India costs significantly lower than employing a similar team in Arizona. In addition to the lower cost of labor, the cost of doing business in a third-world country is substantially lower by as much as 70%. This means higher margins and, therefore, higher profits.
3. Access to expert talent
Offshoring allows companies to easily access expert talent that’s ready to work when you need them. For example, there’s almost a quarter of a million software developer job openings that remain unfilled in the U.S., which means there are more open positions than there are skilled individuals domestically. This enables the talented few to leverage their “rarity” to demand higher pay.
On the other hand, India produces over a million engineers per year, most of whom are IT professionals. A good number of these are skilled individuals who not only have impressive educational backgrounds but also speak English well. With that said, instead of scrambling to hire talented developers onshore and negotiating salaries, companies can simply tap an offshoring partner to sift through the vast pool offshore and find the perfect match.
4. Government incentives
Some countries provide financial incentives and tax breaks to companies that invest in their talent and resources. The Philippines and Malaysia are good examples. Taking advantage of these special concessions makes it easier and more cost-efficient for U.S. businesses to move some of their operations offshore.
5. Uninterrupted business operations
When you have an offshoring partner, you can count on having your business operating round-the-clock, regardless of the time differences. Having offshore teams in different time zones means all hours of the day can be covered and that there will be minimal to zero downtime.
Outsource Offshore With a Trusted Service Provider Like C9 Staff
The thought of offshoring can be intimidating, but it doesn’t have to be. By partnering with a reliable offshoring provider like C9 Staff, you have peace of mind in knowing that all the nitty-gritties of shifting operations to another country are taken care of and that this translates to massive cost savings for your business.
C9 Staff’s end-to-end managed services solutions have proven to be beneficial for the likes of the International Committee of the Red Cross, Native Instruments, and Propel, who reported cost reductions of at least 70% per month.
Contact the C9 Staff team today to learn more about how outsourcing offshore can boost your business.