What is Offshore Outsourcing

Have you ever wondered why a company tends to incline to other global companies located some thousand miles away? Well, the answer is quite simple and probably we don’t need a justification for that, because the statistics themselves prove the right. The rise of the offshore IT outsourcing market augmented due to a shortfall of technical talent within the country. The only thing that fueled the IT outsourcing market and is constantly growing is a dedicated team of the resource pool. These dedicated developers manage to change business needs effortlessly  and help them to focus on their core competencies with custom software services.

Table of Content

  1. Offshore Outsourcing Definition
  2. What Factors should a Company Consider before offshoring?
  3. What are the Key Challenges in Offshore Outsourcing?
  4. Tips for a Successful Offshore Outsourcing
  5. Conclusion

Many companies are aware of what offshore outsourcing is but there are companies who aren’t clear of the concept of offshore outsourcing.  So, to clear this concept, let’s start with understanding the core areas of Offshore Outsourcing.

1. Offshore Outsourcing Definition

Offshore IT outsourcing is a well-known term and its definition states when a business hires a third-party or an external organization to manage their software services. Let’s divide this into two different sections. Offshore is a distance location while offshore outsourcing is a process of escalating tasks to an offshore location where they operate your business and deliver high-performing, superior quality services at cheap labor costs.

No one knows the actual arithmetic of how offshore IT outsourcing works and how it got started. The first and foremost myth about outsourcing is that it is something new. No! Outsourcing is not new. It started some three decades ago but not as a business strategy. But as time evolved, this has become a strategy for current day business ideas.

Businesses have now reached crossroads when it comes to outsourcing. They are no longer confined to the same country and hence the multiple countries’ trading started. This is called offshore outsourcing. There is a consistent debate on why these business processes are confined to the home country and not heading to other countries.

“The value of companies that delegate to external suppliers from IT services is expected to grow by $413.72 billion by the end of 2021.” A leading research firm Statista’s showcased this radical growth in their research report.

2. What Factors should a Company Consider before Offshoring?

All businesses around the world are massively influenced to take benefits of offshoring and want to leverage its benefits. Not all businesses know how to outsource and when to outsource. Most of the things are unclear for businesses when they decide to go for outsourcing services. Thus, we have curated a list of factors that are important and essential for each business.

What Factors should a Company Consider before Offshoring

Starting with the first aspect:

1. Geographical Location

This is an important consideration for all businesses who have decided to escalate their services to other third-party supplier. There are many outsourcing destinations like India, China, Russia and followed by the Philippines and more. Based on geographic location, the outsourcing terms are also classified as:

  • Nearshore Outsourcing
  • Offshore Outsourcing
  • Onshore outsourcing

Depending on the suitability of the business environment, the geographic location is thus an essential factor for a business to choose an outsourcing partner. Specifically for offshore IT outsourcing, there are many countries in the developed world offering offshore services such as the United States, Canada, India, Philippines Ukraine, and many others.

  • Select a country that has already demonstrated business profitability and managed operations for many businesses as an offshore outsourcing partner.
  • Cultural orientation can be another essential aspect while choosing a country for your business. Always incline to a business that is in sync with your business culture.
  • Proficiency in the English language is a vital parameter for businesses to understand and communicate wisely. India is a leading country with the majority of English speaking resources and is considered a leader in outsourcing destinations.

2. Core Business Values

After shortlisting the country factor, it’s now time for your business to zero down all the companies that are thriving to be the best in the race. Some would recommend going for one company, others would say other, but here you should be wise to choose one company that suits best for your expertise needs.

Here are some of the essential checklists that companies must take care of when they outsource to a reliable and trustworthy offshore partner.

  • First and foremost factor company’s website and its business line- domain and industry.
  • The second thing for any business is to check is the financial stability of the business by investigating net income and revenue growth.
  • For if all your needs match, you can check client testimonials on their own website or third-party sites.
  • You can start by inquiring about their pre-existing ideas of business culture and the safety measures on the data breaches that they take while developing a project.
  • Communicate more and more to know better about the business activities.

3. Cost Efficiency

The cost savings is another important factor when manufacturers decide to outsource to an offshore location. Because of trust issues, businesses are not ready to spend higher amounts in terms of costs. Calculations should go right and hence it is very important for businesses to be cost-effective.

Depending on countries, the hourly rates are decided. There are financial engagement models that are designed as per the convenience of businesses functions and they are:

  • Time and Material Model
  • Fixed Price Model
  • Dedicated Development Team

It also depends on the organizations on which model they want to associate their organization with. When it comes to pricing, they follow fixed costs and it also depends on the type of association. Also, as per the designation, the price may vary and will suit the business. When compared to in-house services, Offshore services will reduce costs Offshore services will reduce costs for businesses.

4. Human Resource and Talent Pool

The fundamental reason for hiring talented offshore developers is to have access to the global workforce. You have to test the real human resources and the skill sets that a business can offer.  All rights reserved with the client company.

You can validate the company you outsource by checking their web development service, in-house staff with all the demanded skills needed to perform your job functions. The human resource team is responsible for strategically recruiting developers for the project. Once the project is done organizations will release the developers within the decided time-frame and payment. Time Zone differences enable 24*7 client support.

3. What are the Key Challenges in Offshore Outsourcing?

Enterprises have decided to offshoring but that’s not a one-time decision and may critically affect business in later stages. The later stages are the development phase. One they have zeroed which company to outsource and have initiated the business process outsourcing.

1. Skill Shortage
The problem of a lack of talent is global, especially in the technology sector this is prevalent. Once you have outsourced your needs, there can be concerns about your skillset. This means businesses face problems in lack of skills in the technology stack, expertise, or experience.

Therefore, we advise companies outsource to take this aspect into consideration before driving to any conclusions. Talent-gap of internal resources is a reason businesses outsource and if their offshoring partner is unable to facilitate their needs.

2. Government Rules
As there is a gap in wages between high-cost countries and popular offshoring locations, the significance of offshore IT outsourcing has remained significant over time. Some countries are very strict with their government rules and do not allow cross-border trading. One such country in Europe that has implied GDPR and has restricted the outflow of business in specific regions.

3. Globalization & Standards
If we compare times from a decade back, all sizes of companies have expanded their reach and have globalized their business. Thus it is very essential for your global outsourcing partner to know about standards and their markets. As more and more companies are outsourcing and specifically offshoring.

Partner with an offshore company that has all understanding of standard practices and has all the knowledge of the global market.

4. Adherence of Policy

Once the app development has reached the development stage, you must be more careful. It is important to monitor the progress of the app development, is it going in the right direction or not?

You must make sure the business is aligned and they stick to the requirements as discussed in the agreement made during the launch of the project. Most of the time the offshore partner promises something and the end product is something else. Hence the hiring business needs to make sure the policies adhere to in an appropriate manner.

4. Tips to Effective Offshore Outsourcing

Offshore IT outsourcing gives your business a large benefit of contracting global resources for your software products. Some of the outsourcing benefits are you can easily expand the business, strategize, and grow in a labor force at lower costs. Now that we have understood each aspect that plays a vital role in offshore outsourcing, it is now time for experienced tips. After catering to multiple businesses from different domains and industries, our team of experienced developers can share some important tips.

Tips to Effective Offshore Outsourcing

1. Take Time and be Selective

We would advise businesses to take time in making the decision of choosing a partner. They can be local or an offshore IT outsourcing partner. It is not a “one-time solution”,  it is a long term engagement plan that should reap benefits for your company.

Be selective and choose the right partner that will benefit you in the long run. Of course, there are businesses engaged in the same offshore outsourcing phenomenon for years and can be a guiding light for your business. Look for the quality of software development services and perks they offer to your business functions.

2. Stay Constantly Connected

“It’s time to bust this myth that offshoring is new”. No, it is not new. People have been a part of offshore outsourcing for years. Offshore outsourcing is a completely different location and that’s the reason most businesses are hesitant to outsource. But technology has grown exponentially and is providing unparalleled customer service to connect and communicate.

This is a vital tip to stay connected with your offshore team for regular updates, monitoring, and project status. Basically, if you find that flying offshore is not a cost-friendly affair then technology can help you here. You can install apps like Skype, Google Meet, Zoom and GoToMeeting to make face-to-face operations.

3. Trust your Offshore Outsourcing Partner

For successful offshore outsourcing solutions, trust is a major factor for all businesses. You need to trust your outsourcing partner for your business and they will excel in their service offering. Judge accurately for your business, what suits best for your unique business needs.

Take a bold and transparent approach to set up the business. Take all aspects into consideration from a legal entity, office operation, hire a team, and begin a close collaboration that would develop trust. The developed trust will offer a transparent approach and practically longer solution.

4. Build Rapport for a Successful Business

The organization abroad you hire as your outsourcing partner is extremely critical for your business. You can use the capability of the service provider to utilize the talent, knowledge and skill set. It is quite important to ensure that there is robust team cohesion, collaboration and aligning business for a good rapport between teams. And make sure all rights are reserved.

To build successful rapport, you need to manage and communicate with teams frequently and for that keep the following tips in mind.

  1. Give them a close understanding of your business goals
  2. Know each individual of your dedicated development team
  3. Clear all doubts and make them feel approachable
  4. Take communication seriously and regular take meetings
  5. Disconnection is fine but no miscommunication with people
  6. Provide accurate feedback and keep the developers motivated

5. Conclusion

Offshore Outsourcing is an expedited business process outsourcing with countless benefits and perks. There are challenges but there are resolutions too. You can quickly get the return on investment for your cost invested and your business will be able to gain a competitive edge. Offshore partners are a blessing for large and small businesses if you know to take the best out of them. Through this blog, we have covered all the aspects that are essential for your business that will benefit them with higher efficiency, better quality, expected outcomes, and consistent customer support experience.

Itesh Sharma

Itesh Sharma is core member of Sales Department at TatvaSoft. He has got more than 6 years of experience in handling the task related to Customer Management and Project Management. Apart from his profession he also has keen interest in sharing the insight on different methodologies of software development.


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