Is Outsourcing The Right Strategy For Your Business?

Moving forward to 2023, after the pandemic, the world is now seeing a shift from full time office work to an increase in remote work. And this too has blurred the lines between hiring full-time workers, outsourcing, and offshoring. When everyone is remote, does it matter whether your staff are down the street or on the other side of the world? This is an increasingly digitalised economy, services can now be delivered online, and from anywhere.

So, now, knowing this, should your business take advantage of hiring third-party services? Yes, but it’s not that simple. How does it work? Is it really for your business? What even is outsourcing? Well, Outsourcing is the process of hiring an external team to take care of some of your business functions, such as finance, marketing, and IT. In 2023, contracting IT services in Vietnam has been on the rise, with more than 50% firms are looking to outsource some of their functions somewhere, so that they can focus on their core business. Philippines has been one of the popular choices amongst Australian firms, with more than 30% firms choose an outsourcing partner in the Philippines. Vietnam is also a close second, with many advantages such as low cost, English-speaking staff, and educated workforce.

Now that you have a destination in mind, what outsourcing model then might be the right for you? Review the list below:

1. Onshore Outsourcing

Contents

1 1. Onshore Outsourcing
2 2. Offshore Outsourcing
3 3. Offshoring
4 4. On-demand outsourcing (cloud computing)
5 5. Hybrid Outsourcing

This is one of the most popular choices. This means a company outsources its business processes or services to a service provider located outside a company but within the same country. This is favourable amongst many due to its proximity. Firms prefer this model because it has effective communication and cultural alignment. Some example of onshore outsourcing include call centres, customer support services, and IT consulting. Some popular companies such as Apple, IBM, and Bank of America, have chosen this as their preferred outsourcing model. Many companies in Australia have outsourced their staff to Vietnam.

2. Offshore Outsourcing

Offshore outsourcing is the opposite of onshore outsourcing. Offshore outsourcing means using the services from people or companies outside the country. Organisations use this model to reduce costs while still maintaining quality services. Popular destinations include India, the Philippines, and Eastern European countries. Popular companies such as Amazon, Microsoft, and Google also favours this model. A close term to offshore outsourcing is nearshore outsourcing. They bear similar definition, but nearshore outsourcing use a service provider that is located in a neighbouring or nearby country, due to its advantage of overlapping time zones and reduced cultural differences, making collaboration easier and more effective. Many companies in the United States have outsourced their staff to Canada and Mexico.

3. Offshoring

Offshoring means involving a portion of a company’s operations to a foreign country. Now, it is often confused with outsourcing, which means delegating business process to another company or independent service providers. A good example of offshoring is when a business builds a factory overseas, they own and manage that offshore facility. Amazon has been offshoring its research and development team to a Ukrainian startup specialising in home security systems.

4. On-demand outsourcing (cloud computing)

On-demand outsourcing means externalising IT services or infrastructure to cloud service providers. Since this model allows for a pay-as-you-go basis, companies pay for services as needed, making this a flexible and scalable solution. Common cloud providers include Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). One thing to keep in mind is the protection of sensitive data as the third-party provider will host and manage your data, applications, and other resources.

5. Hybrid Outsourcing

For example, a company might use onshore resources for core functions and offshore resources for non-core tasks.

So, are you ready to staff on-demand from any geography? Now that you are ready, the stress come with choosing the right model might still be there, but we are here to help! Speak to one of our experts at Away Digital Teams today.

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Frequently Asked Questions(FAQ)

How can businesses determine whether outsourcing is the right strategy for their specific needs and circumstances, particularly in light of the shift towards remote work and the digitalisation of services?

Businesses can determine whether outsourcing is the right strategy for their specific needs and circumstances by evaluating various factors. They should consider the nature of their business functions, the availability of internal resources, the level of expertise required, and the potential benefits of outsourcing, such as cost savings, access to specialised skills, and scalability. Additionally, businesses should assess the impact of outsourcing on their overall business strategy, including alignment with long-term goals, competitive advantage, and customer satisfaction. Given the shift towards remote work and the digitalisation of services, businesses should also consider the feasibility and effectiveness of managing remote teams and leveraging online platforms for service delivery.

What factors should businesses consider when choosing between different outsourcing models, such as onshore, offshore, nearshore, offshoring, on-demand outsourcing (cloud computing), and hybrid outsourcing?

When choosing between different outsourcing models, businesses should consider several factors to determine the most suitable approach for their needs. These factors include the complexity and criticality of the tasks being outsourced, the desired level of control and oversight, the geographical location and cultural compatibility of the service providers, and the cost-effectiveness of each model. For example, onshore outsourcing may be preferred for tasks requiring close collaboration and communication, while offshore outsourcing may offer cost savings and access to a larger talent pool. Nearshore outsourcing may provide a balance between proximity and cost, while hybrid outsourcing allows businesses to leverage both local and offshore resources for different functions.

In what ways does the choice of outsourcing destination impact the success of outsourcing initiatives, and what are the key considerations for selecting an optimal location, such as cost-effectiveness, cultural alignment, and access to skilled workforce?

The choice of outsourcing destination can significantly impact the success of outsourcing initiatives, and businesses should carefully consider several key factors when selecting an optimal location. These factors include the cost-effectiveness of the destination, including labor costs, taxes, and overhead expenses; the availability of skilled workforce and expertise in relevant industries; the cultural alignment and communication capabilities of the workforce; the political and economic stability of the country; and the regulatory environment, including data protection and intellectual property laws. Additionally, businesses should assess the infrastructure and technological capabilities of the destination, including internet connectivity and IT infrastructure, to ensure smooth collaboration and service delivery. By carefully evaluating these factors, businesses can select an outsourcing destination that best meets their needs and maximises the potential benefits of outsourcing.