Global versus local outsourcing Do they actually differ? Depends, really. There is no easy “yes” or “no” answer to the question. The term “outsourcing” refers to a business activity when a corporation employs a third party to carry out duties, manage operations, or offer services on the firm’s behalf. This could imply that you could contract with a company nearby or a third party on the opposite side of the country to handle a task, a job function, or an entire team. Offshoring is another name for global outsourcing, which is the practice of outsourcing work to a third party headquartered abroad.
This post will discuss the main causes that prompt businesses to outsource internationally, along with benefits and drawbacks.
What are the main reasons companies rely on Global Outsourcing?
With a compound annual growth rate (CAGR) of 8.5%, the global business process outsourcing (BPO) market was valued at $245.91 billion in 2021 and is projected to reach $435.89 billion by 2028.
It is not surprising that 70% of CEOs cite cost savings as their primary justification for outsourcing. The 2020 Global Outsourcing Survey by Deloitte states that “cost reduction is what drives the decision to outsource globally. It won’t happen if there is no positive cost case. Cost is always an issue. Many smaller companies might not have the resources or operational needs to employ a workforce or outsource work locally.
Flexibility, cited as the top benefit by 40% of CEOs, is another factor that makes offshore or global outsourcing to a lower-cost economy so alluring. A Clutch study indicated that in addition to lower costs, 24% of small firms look for international outsourcing services to increase their job productivity, with another 18% adopting it for professional advice.
The effects of the pandemic in recent years have made digital transformation a rapidly developing trend. Better cybersecurity safeguards and more capacity are now required to stay up with Industry 4.0 improvements as a result of this. In fact, to tackle any potential digital hazards that may come along with this unanticipated transition, 83% of top IT businesses are considering collaborating with international outsourcing services.
A worldwide talent shortage is another problem that is affecting businesses in all industries. Approximately US $8.5 trillion in annual revenues remain unrealized as a result of 69% of organizations struggling to find and keep quality people. Therefore, firms can access a high-quality, worldwide talent pool by investing in global outsourcing techniques as opposed to solely focusing on the local market.
What are the benefits of Global Outsourcing?
Now that you know why businesses outsource to other countries, let’s talk about some of the main advantages of working with offshoring or business process outsourcing (BPO) companies.
Growth and Scalability
The inability of companies to invest in new resources to fulfill growth goals is a major barrier to their ability to expand. In order to take advantage of possible growth prospects, businesses frequently don’t have the time to hire a new employee. In as little as six to eight weeks, certain international outsourcing firms may have your outsourced crew up and running. By doing this, you’re able to free up money that you may utilize to reinvest in the expansion of your company. Your company’s ability to take on more work can be increased with the added assistance of a worldwide outsourced crew.
Improved Quality and Efficiency
By leveraging global outsourcing, you can delegate time-consuming and monotonous duties to a person abroad rather than to your in-house staff. In this way, your overseas crew will be grateful for the chance to support your business while your local team can concentrate on what they do best and what drives them.
By enhancing the quality of your interactions with clients, expanding your accessibility to them, and giving them access to professional services at their leisure, outsourcing can also increase customer satisfaction. Businesses can even set up a round-the-clock customer care line so that their in-house staff can concentrate on building relationships while your outsourced team competently responds to customer service issues.
By having routine jobs carried out in a country with cheaper labor costs, like the Philippines, where employment expenses can be as low as 70% less, global outsourcing can reduce expenditures for your business. It costs money to hire new employees. A new offshore team’s hire comes with a lot of overhead expenses. You can now choose from a variety of global outsourcing models, but it’s always crucial to pick the one that works for you.
The “managed operations” model is a well-liked approach to outsourcing, where a third-party supplier handles hiring, HR, new office equipment, superannuation, payroll tax, workers’ compensation, IT, and managerial oversight generally. You would simply need to give up time, which is a long-term investment for your company, to train new offshore employees in this approach, aside from the engagement fees.
Is Global Outsourcing ethical and will it benefit my business?
Global outsourcing can be advantageous for all parties involved, from CEOs and local employees to customers and your offshore crew.
It can help firms become more efficient and flexible as they scale and grow, allowing many to reinvest in other parts of the business.
Your local team will have more time to work on other, higher-level projects if you outsource just one administrative activity. Developing customer relationships or beginning planning for a project that may have been delayed by a few months owing to administrative overburden could be examples of this. This produces a cascading “efficiency impact,” which allows for more onshore work that is less time-consuming and more focused on corporate growth.
One important question that many businesses ask before hiring an offshore supplier is, “Is outsourcing ethical? ” Yes is the short answer. You offer competitively paid jobs and employment possibilities to people in other nations. Take the Philippines as an illustration. The Philippines’ outsourcing sector, which employs about 1.2 million people and is among the top employers in the nation, has had a considerable positive impact on the local economy. The outsourcing industry pays competitive wages to Filipino workers, however they are on the lowest end of the pay spectrum.
However, industry employees frequently earn more than twice as much as the national average and frequently receive the bonus of membership in a health maintenance organization (HMO). Companies looking to engage outsourced workforce frequently must adhere to country labor regulations, which are tightly enforced and serve to protect the rights of private employees.
Choosing the appropriate outsourcing provider is essential for success.