Advantages of Offshore Outsourcing in Business

Cost is one of the main drivers for companies to use outsourcing, outsourcing or a combination of the two to stay competitive.

More and more companies may consider outsourcing and outsourcing their work as a potential way to reduce costs and streamline their operations. So, what is outsourcing? Outsourcing is when a company hires an outside organization to perform specific jobs or provide services. Leased manufacturing means that a business arranges to complete its work in another country, often to take advantage of the cost savings.

Many companies may be considering one or both of them – or a combination of the two, known as offshore outsourcing – to help stay competitive, especially in global markets. So, in this article, Outsourcing Vietnam would like to introduce the Advantages of Offshore Outsourcing in Business, check out now.

Advantages of Offshore Outsourcing in Business

1. Outsourcing vs. offshoring: How are they different?

Although the terms are often used interchangeably, there are some key differences between outsourcing and outsourcing:

Outsourcing

This involves contracting work for a third party, whether or not it is abroad.

It is possible to outsource to a supplier without sending work overseas. For example, a company in North America might hire a local accounting firm to manage their accounting records instead of letting its employees do the work from home.

Offshoring

This is when a business moves some of its activities and employees overseas, often to less developed countries with cheap labor and resources.

Businesses can establish overseas operations without having to hire those processes to a third party. For example, a company might move its call center to India to serve North American customers.

2. Pros and cons of offshoring

Potential advantages of offshoring:

  • Reduce labor costs

One of the potential advantages of outsourcing is that businesses can save money by hiring foreign workers to do the same job for less than the cost in North America.

It makes more sense for companies in the United States to pay foreign employees with lower wages than domestic employees. Subleasing becomes a good business practice for business owners if the overseas workers can do the same kind of work as their American counterparts with much lower labor costs. This is especially important for labor-intensive businesses such as manufacturing and service jobs, where reducing labor costs can help reduce operating costs, increase revenue and maximize income.

  • Establish a new market

Establishing a presence abroad can allow a company to expand its customer base to other countries.

  • Enhance knowledge about foreign markets

Foreign employees may have better understanding of regional trends, markets, business risks and cultural norms in their home countries than North American employees.

  • 24/7 operations

Companies can hire foreign service providers to provide 24/7 operations so they can still handle work outside their operating hours or keep business 24 hours a day. In addition, the local team in the US can transfer the unfinished tasks to the foreign team so that there is ongoing work for a project until it is completed.

  • Availability of skilled labor¬†

Outsourced locations such as China and India are known for being the high-quality workforce that US companies can employ. Besides, Vietnam is also emerging to become an ideal destination for outsourcing. You can refer to the article Top 5 Reasons Why you should outsource to Vietnam. These countries have young human resources, English skills, university degrees and good thinking

  • Replacement tax and regulatory benefits

Some countries offer tax breaks and financial incentives to entice foreign companies.

Potential disadvantages of offshoring:

  • Language barrier

Many countries use English as a 2nd official language in their country. But it still has differences in English knowledge, especially in communication, accent, etc

  • Regulatory differences

There are also foreign laws and risks that can interfere with business

  • Time zone

Working with employees overseas may mean calling in inconvenient times to contact them during their normal business hours.

  • Exchange rate

High and low currency valuations can cause a significant drop in overseas transactions and can offset savings.

  • Quality control problems

Ensuring the product will be built to the parent company’s standards can be a challenge when outsourcing overseas. Even if the parent company provides quality standards and guidelines, differences in working culture, language, etc. can affect the product quality in general and the software in particular.

Looking for the advantages and disadvantage of outsourcing? Check out the article: Why Outsourcing Software Development Works: 8 Benefits of Outsourcing

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