In the early ’90s, everyone stumbled upon a revolutionary phenomenon of escalating tasks to experts. The majority of businesses initiated this method to gain the advantage of unskilled tasks and in a cost-effective manner. Every business has successfully harnessed the benefits of software outsourcing services. Initially, it was developing countries that used to outsource their tasks to developed ones to get ahead in the market for a competitive edge. Now two decades later, the surge of outsourcing has just grown.
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IT outsourcing has benefited businesses on a larger scope, and from the above fact, it is expected to grow. The growth has never been marginal but businesses have always gained massive benefits from all the types of outsourcing from offshore, onshore or nearshore outsourcing. The process of outsourcing is much more obvious. One business contracts to another leverage all the technical potency and expertise and develops cutting-edge software applications and solutions.
It is an interesting question: how do businesses select the type of outsourcing?
Businesses select the type of outsourcing companies based on their suitability of business and their budget. For businesses, wanting to collaborate with a company within the city will choose Onshore outsourcing. For businesses who need to do frequent visits to the outsourcing company will opt for Nearshore or Onshore outsourcing. Finally, for businesses trusting their resources completely and having developed a transparent communication may go for Offshore outsourcing business. In this blog, we will elaborate on the operations, functions, resources, and all other significant factors that contribute to making offshore outsourcing successful for businesses.
The global IT outsourcing market is expected to grow by $98 billion by 2024.-Source
1. Definition of Offshore Outsourcing
Offshore outsourcing is a strategic plan that is taken into practice by businesses around the globe. Businesses can hire third-party suppliers to perform their in-house tasks and these employees are located in a completely different country.
They say Offshore Outsourcing is an age-old practice and it has refined with time. The evolution of outsourcing gathered steam around two decades ago and industries from retail, real estate, IT outsourcing, and others. After outsourcing reaches a global platform, there is a continuous growth curtailed with its benefits.
The key to successful offshore outsourcing is trust and transparent communication. Businesses are hellbent on finding the right offshore outsourcing partner but finding one is a complicated process. Getting the right outsourcing partner is a boon for business but not many businesses know how offshore outsourcing business works. So, we have prepared a comprehensive guide for businesses to understand when to outsource, the importance of software agreement, NDA policy, and several other benefits of an offshore business.
2. How does Outsourcing Work Overseas?
One of the major reasons for businesses to decide whether outsource locally or overseas depends primarily on cost and access to global talented resources. If a company has decided to leverage the benefits from software developers then the company won’t settle for any lesser talent but would hire the best of breed if it confines their budget. It makes much sense to hire talent from overseas rather than compromising on a nearby resource.
Here are some of the factors that make clear differentiating factors between outsourcing locally and globally.
- Firstly, if we take a holistic look at the company then there are factors helping businesses to make a decision. Factors like price, reputation, business culture, communication, compatibility, commitment, and others.
- Secondly, the capability of business is to understand business goals, manage their communication and business relationship contract.
- For businesses locally managing and looking for a local partner can look for language compatibility, culture, size of the business, size of hiring developers, technology experience, and skills. These are the factors of outsourcing.
- For overseas, business communication and virtual management are two factors that make offshore outsourcing successful, as always, price is a major reason, and less expensive being one of the predominant reasons for businesses to go for offshoring.
- Overseas outsourcing ensures profitability for different industries. It offers substantial cost savings, less costly raw materials, and lower tax rates that effectively contribute towards making a business-friendly environment.
There are no stones left unturned by overseas outsourcing businesses to cater to out-of-the-box services. Trust, commitment, and quality have always been their ethics of doing business. From the ’90s and up till now, there is nothing that has stopped offshoring business, they have just grown and are offering better and economical services than before.
3. Top 6 Countries Considered Best for Offshore Outsourcing
No country is an exception and most of them have adopted this trend of outsourcing to other countries with an aid of multiple profitable results. Several factors contribute to making a country or a company their desired location. Enlisted are some of the prominent factors that contribute to making a country and ideal.
- Lower labor cost
- High-quality advanced infrastructure
- Sufficiently high IT companies and matured market
- Developers of multi-functional profiles
- Ability to fluently communicate in English
- Small cultural differences
- Timezone differences
Offshore outsourcing countries, even with cultural differences, are capable of offering a combination of all these benefits. Out of 193 countries, these are some of the top-rated countries in the offshoring business. Not all of these countries will cater to the needs of the market equally and hence we have shortlisted the following countries based on experience, expertise, and cost as primary factors.
The first one in this list in India:
India is one of the most reliable countries to associate with when we hear about the term ‘outsourcing’. Developers are available in large numbers here and the hourly rate ($10 to 25) is comparatively low. The overwhelming qualitative services are the biggest turnoff for collaborating with companies located in this nation. Largely, this country has been proving itself with reliable services making larger business benefits.
2. The Philippines
Growing advancement has made the Philippines a wiser partner for outsourcing services. About 9 out of 10 Filipinos speak English, making it the most spoken language in that nation. Lower labor costs and highly transformation educational formats have led to a substantial increase in the number of specialists available on the market in this country.
However, if you entrust the Philippines for complicated IT projects then it should always be a matter of choice based on experience.
The increasing count of freelancers in this country has made it one of the leading destinations for offshore outsourcing. With more than 2000 IT companies and more than 120000 developers, their IT outsourcing market is never steady and is always propelling. The reason for considering this location as the highest priority is because of their enhanced educational system and developing countries at nearshore.
Undoubtedly, China is a leader in all technology arenas and it facilitates businesses with a large number of innovative IT services. Chinese technologies have skyrocketed offering a wide variety of technical experts and services. Communication in English is a small barrier but however with other tangible benefits that they are capable of offering to cover this up.
Poland is one of the most prominent outsourcing destinations in Eastern Europe, alongside Ukraine. One of the convenient reasons for preferring Poland is simplified communication. It is believed that a quarter percent of the total local population can speak English as their second language. This can be considered as a greater advantage for cooperating with Western clients.
Russia is also no less in the race of catering advance to individual business needs. With greater area and population, this nation also holds an absolutely high number of specialist and technical mavens. There has been no question on the progressive technology adoption and innovation that Russian companies follow. Kotlin (a programming language) is an eminent example of Russian IT companies and their advancements. Russian IT companies offer low charges and are cost-effective when compared with other countries.
4. How can you Select a Vendor from an Offshore Location?
Enterprises may find it challenging to find an offshore outsourcing partner located from a distinct location. We have curated and filtered a few ways to find a partner for your outsourcing needs. Firstly, you can start with peer business recommendations from your contacts who can guide you to find the best partner. The second option is to search organically from the internet and search engines. Thirdly, there are sites like Linkedin and other platforms helping with company portfolios, reviews, and ratings. Some of these ways will guide you to fetch a partner. So, we have also designed steps that could help businesses to find an offshore partner.
- Start with defining your Business Goals
Businesses need to have a deeper understanding of the goal and its potential benefits. Keeping the requirement curt and crisp with the offshore developers will make the clear about the end goal.
- Analyze their Skillset
Now that you know your skills, it’s now time to match those businesses’ goals with the skillset of the offshore development company. To convert your business idea into reality and it is very important to analyze the developer’s skillset.
- Communication Parameters
Businesses cannot go and visit the offshore partner so often and hence communication from both ends should be perfectly managed. However, technology has advanced so much that businesses can easily take calls and set up meetings, and can regularly monitor the work.
- Plan your Budget
Your budget is the only reason you go for offshore outsourcing. Businesses must ensure to make the best utilization of capital invested and in return get the maximum ROI.
- Associated Risk Factors
Numerous risks such as communication gap, transparency, slower response times, contractual norms are some of the risks associated with Offshore outsourcing. Businesses must sign an NDA or draft a software agreement and mention all necessary risks in the clause to get relieved from the stress of risk.
- Timezone Benefits
Time Zone is definitely working in favor of companies because in different timezones businesses are indirectly functioning 24*7. They are bringing the best and faster outcomes by meeting quality benchmarks.
Through this blog, we were able to explore the functioning of offshore outsourcing. We have curated this blog showcasing the difference between both local and overseas outsourcing, compared countries, their pros and cons of partnering. Additionally, we have seen different perspectives of offshoring through this blog and their innumerable advantages of offshore outsourcing such as
- Cost and Time-saving
- External experts
- Focused strategy
- Reduced time to market
- Technological Advances
- Reaching a Broader Market
- A fresh perspective to old business
Our effort to guide businesses find their ideal software development company that caters to the client’s emerging business needs. Businesses should ideally not restrict themselves to a city, state, or country. There are a lot of opportunities waiting for next door, just tap on the right offshore outsourcing partner.