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What is business process offshoring?

Offshoring or offshore outsourcing is a type of business process outsourcing (BPO).
The process involves a company hiring a third party provider in a different location to handle its operations.
Business process offshoring is a cost-effective business strategy that gives a company access to a skilled talent pool, technology, business scalability, and other resources.
However, offshoring can sometimes be confused with other types of business process outsourcing — including nearshore and onshore outsourcing.

Here’s how the two are different from offshore outsourcing:

Nearshore outsourcing:

When a company outsources a business operation to a BPO vendor outside its home country but within the same continent. 

Onshore outsourcing:

When a company outsources operations to a BPO provider within its home country.  Now that we’re clear on what business process offshoring means, let’s look at its four key advantages.

4 key benefits of business process offshoring

Here are some of the important benefits of offshoring your business operations:

1. Increased cost savings

Offshoring is usually a cost-effective affairs. This is often the primary reason why most businesses opt for it.
Here’s how offshoring can help you cut costs:
A. Labor costs
Hiring skilled talent from popular offshoring destinations like India and the Philippines is much more cost-effective than hiring the same talent in North America and Eastern European countries. For example, in 2022, hiring skilled labor for data entry services would cost you approximately 3,021 USD in New York City. Offshoring the same talent would only cost you around 274 USD in a developing country like the Philippines.
B. Hiring costs

When you offshore, you’re only paying the service provider for their work. Unlike insourcing, where you’d have to hire and train in-house employees, you won’t be dealing with these additional costs through offshoring.
 
Additionally, you can save on the capital you’d otherwise spend on employee benefits, bonuses, and other overhead costs. 

2. Access to a skilled talent pool
Offshoring can allow businesses to easily access any expertise they can’t find within their home country. An example of this is the software developer shortage in the USA. According to the Bureau of Labor Statistics, the shortage of engineers in the USA will likely exceed 1.2 million by 2026.

The lack of specialized skills has led companies to turn to foreign countries like Ukraine, Poland, and India for software development services. These offshoring hubs can provide companies with a large and educated talent pool.
3. Increased business scalability

Offshoring can aid international business expansion and scalability in various ways.
How? With business process offshoring, you can:

Understand the market in a different country before setting up a business.

Save on various labor costs and invest the capital into scaling the new business.

Engage in product offshoring to set up manufacturing units in an offshore location and save on production costs.

Speeding up the timeline of project and development deliverables for the expansion.

4. Access to technology and resources
Your business may be engaging in both core and non-core business operations.
It’s usually possible to invest in technology, resources, and training for core competencies. However, your company may not be able to invest in the same resources for non-core activities. This is where outsourcing service providers come into the picture!
We Build Your Next-Gen Team for a Fraction of the Cost. Get in Touch to Learn How.
Offshore outsourecing companies
Usually have specializations in a particular business function and access to the latest technology.
Additionally, an offshore tech company also has a skilled and trained human resource to deliver quality work in high volumes.

Today, an offshore BOP service can give you access to the latest technology related to artificial intelligence, automation robots, data analytics, design thinking, and more.
Now that we’ve looked at the advantages of offshoring, let’s dive into its limitations.