If we want to talk about offshoring, it is necessary to speak of globalization since offshoring is born from the globalization process that has touched previously unthinkable aspects such as the culture and lifestyles of people in the world. Of course, it also reached the business environment.
Companies often resort to offshoring for different reasons. The most common use of offshoring is to save money on labor costs. By having the company’s workers perform the work in a foreign country, the company can save money on labor costs, it can also be used to get the work done on time. By having the work done in a foreign country, the company can ensure that the work is completed on time.
Companies frequently employ varying strategies to meet their needs and thrive in a highly competitive market. They search for different solutions and tools to stay relevant and sustainable. If you’re interested in learning more about offshoring, you’ve come to the right place.
You might also like: Outsourcing Vs Offshoring Vs Nearshoring: Key Differences
What is Offshoring?
Offshoring is the process some companies use to outsource work to a foreign country. This strategy can be done in several ways, but the most common is to have the company’s workers in a foreign country perform the work. An example would be when a software company in Canada sets up a development team in the Philippines to take advantage of the technical expertise available at a lower cost. In this way, the company can undertake development projects at a more competitive price.
Benefits of Offshoring
- Finding specialized workers
Offshoring provides a global talent pool, enabling you to hire skilled professionals from various parts of the world. This allows you to acquire specialized skills that may need to be more readily available or affordable in your country.
- Save money
Offshoring can reduce costs because you can work in places where labor is cheaper.
- Work around the clock.
Different countries have different time zones. So, when it’s night where you are, it’s day where your offshore office is. This means that work can happen around the clock, which makes things run faster.
- Companies can access emerging markets.
Offshoring also allows companies to access emerging markets and tap into the potential of developing countries. This is how large business giants can foster growth in other communities and expand their customer base.
Disadvantages of Offshoring
Offshoring production can present various challenges for companies. One significant disadvantage is that they become dependent on another organization to meet their production needs. If this organization becomes unavailable or unable to fulfill its requirements, it can be challenging to find a replacement quickly. Additionally, some companies may be required to share their proprietary information with their offshore partners, putting them at risk of intellectual property theft or misuse.
Furthermore, talent coordination, cultural differences, and remote communication can make offshoring difficult. Urgent issues may be challenging to resolve in real-time, leading to production delays or quality problems. Managing remote teams can also be challenging due to cultural differences, language barriers, and the need for regular reporting meetings. However, there are ways to mitigate these challenges. Companies can invest in cross-cultural training and develop clear communication protocols to ensure that everyone understands their roles and responsibilities. Regular check-ins and performance evaluations can also help to ensure that the team is meeting the company’s expectations.
Differences Between Offshoring and Outsourcing
These terms often need clarification. However, they are two very different business activities. From a geographical point of view, offshoring involves moving operations to another location. In contrast, outsourcing does not have to, as it can be done from the same country of the company that wants to use this strategy.
Another difference would be that outsourcing is a rationalization activity for a company, and offshoring is an activity related to geographical displacement. Finally, offshoring is motivated by cost reduction and profit increase, while outsourcing encourages the company to focus on key areas of specialization.
But, is offshoring the best option?
It is well known that China was the world’s factory for a long time. Many companies took advantage of the favorable conditions offered by this country and obtained great benefits due to the low production costs. However, the collapse of the 2020 pandemic in the trade routes, the lack of supply, and the closing of borders generated a severe crisis, which made them put on the table the idea of a new strategy: nearshoring.
Nearshoring – your best strategy for 2024
Therefore, nearshoring has become the ideal candidate, as it not only offers the benefits of proximity but also features other advantages such as low costs, similar time zones, and cultural similarities that make the work much more manageable.
Are you thinking of taking your company global? Intangibles Talent, we are a nearshore agency and can offer you comprehensive support in every step of this process. Why not take the first step and let us help you achieve your goal?