Why You Should Offshore Your Operations: 5 Key Benefits
Are you looking to grow your business in a proven, cost-efficient manner? Then offshoring might be right for you. Some experts predict offshoring will become even more prevalent in the post-pandemic world. Now might be the best time to prepare for that new reality by understanding the benefits and also the potential drawbacks of offshoring― so you can decide what’s right for your business.
What is Offshoring?
Before we review the benefits offshoring can have on your bottom line, let’s take a moment to define it. Offshoring is when a business moves some of its operations or labor force overseas to reduce costs and increase overall profitability. Additionally, offshoring provides access to a highly skilled global talent pool.
There are two main types of offshoring that businesses can consider:
Types of Offshoring
Offshoring typically refers to either services offshoring or production offshoring.
Services Offshoring
Offshoring service-related parts of your business can include offshoring your company’s customer service, financial/accounting, human resources, sales, and IT needs.
Production Offshoring
Production offshoring involves the relocation of physical processes of your business, such as manufacturing.
What are the benefits of offshoring?
1. Lower labor costs
One of the most valuable benefits of offshoring is reducing labor costs. It can be more affordable for companies based in the U.S. to hire foreign employees― which frees up allotted labor funds that can then be reinvested into the business.
2. Overhead Savings
Aside from reducing personnel costs, offshoring can provide other significant savings as well. For example, real estate and utility costs may be lower in the offshoring country than in the business’s country of origin. All of these savings can positively impact a company’s bottom line.
3. Financial & Regulatory Incentives
Many offshoring destinations offer friendly business environments to attract foreign investment. This is accomplished through the strategic use of financial incentives such as tax credits and favorable business regulations.
4. Greater Staff Availability
Another benefit of offshoring is the ability to have employees in multiple time zones, which provides the flexibility of offering 24/7 technical support or customer service. It usually also means your business needs can be accommodated faster.
5. Access to Global Talent
There is ample skilled labor available to businesses that offshore― for example, in countries such as India and the Philippines. Offshoring offers companies access to a borderless workforce.
Disadvantages of Offshoring
Now that you know more about the benefits of offshoring, it’s important to understand the potential risks.
- Quality control – Quality control problems can arise with offshoring, particularly with manufacturing. Quality concerns are why many companies move their manufacturing back to their home countries.
- Data security concerns – It is crucial to consider the security risks of offshoring and ensure safeguards are in place to protect company data.
- Language and cultural barriers – Differences in language, communication styles, beliefs, and attitudes can all affect the productivity of an offshored workforce.
At Cloud Hiring Solutions, we help companies streamline their company to be the most profitable possible. Contact us today for a consultation.