Outsource vs Offshore: Differences and Benefits
As your company grows, the need to hire new employees becomes vital. The more employees your business has, the more tasks your team will accomplish. In contrast, you also need to pay more workers, and you will need higher investments when starting a project.
There are many cheap options you can opt for when hiring an employee, such as outsourcing specific tasks, or if your company is big enough, hiring a call center to take care of your employees. In this article, we will explore the differences between outsourcing, offshoring, and hiring a call center.
Before getting into the pros and cons of each one is necessary to understand that call centers can be local, onshore, offshored, or outsourced. Let's look at the definition of each of these terms first.
Call Center: An office dependant on a company that handles customer care or IT services. Regularly, it consists of 25+ employees trained in the company's processes.
Onshore: Situated or occurring in the land. Onshoring is an office located in the company's country of origin in which all of its customer care employees work.
Offshore: An office situated in a different part of the world run by the leading company in its original location. Offshore is commonly used to drive down the cost of maintaining employees and transferring those benefits to the consumer.
Outsourcing: A business that takes care of specific tasks for another company, such as customer care, virtual assistance, or design.
Now that you have these definitions in mind, it is time to learn the benefits and drawbacks of each one. There is no better than the other, but you must understand your business needs. Once your company's needs are set in stone, you can look at your budget and analyze the different aspects of each of these options.
According to Investopedia, outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company's own employees and staff. A business outsources some of its tasks to save money instead of hiring a regular employee.
Cost advantage. Outsourcing tasks to other employers is arguably cheaper than hiring a new employee. You can save on equipment, training, and employee benefits.
Core activities. When outsourcing tasks to another company, your current employees can focus on core tasks, such as sales, marketing, or finance.
Compatibility. Sometimes, a company does not have the necessary skills in certain business areas, so hiring outsourcing companies has increased in the last few years. As more skills are needed in several fields, outsourced companies focus on specific traits most companies need. Moreover, hiring an outsourcing company to help your marketing or sales team is a common practice.
Labor flexibility. This benefit is focused on project-based companies. When you have a project that should be finished in a short amount of time (up to 6 months), hiring an employee may not be the best way to go. By hiring an outsourcing company for the amount of time the project is due, you will significantly save your HR budget and destine it for something else, like ads or improving your products.
Control. As many benefits an outsource company can provide, there are also drawbacks. And the main one is the control over your project. Unless you keep active communication with the outsourcing company's liaison, the chance is you will have to review the end product a lot more than having an employee which you can check in with every once in a while. This con also reduces your quality control. Maintain constant contact to avoid this downside.
Scheduling. Hiring an outsource company or freelancer can be difficult when scheduling meetings and general reviews. If they are located in different time zones or prefer working outside regular labor hours, you will have trouble getting ahold of them. It is vital that you set regular meetings and deadlines from the beginning of the project.
Communication. Communicating with your team in person is more effective than an email or a phone call. Sometimes, your instructions or specific needs get lost in translation when transmitting them to an outsource company. As you have less control of their actions and cannot review them constantly, you will have to wait for end products to assess their work and make corrections. Taking a lot more time than hiring an actual employee.
Offshoring is the relocation of your business process to another country. The offshore operation can be handled by the company's subsidiaries or through offshore agencies across the globe. It is divided into two types, product offshoring, and services offshoring.
When your company opts for product offshoring, it means that your production lines will be placed in another country and from there will be imported into the company's country of origin. The clearest example of this is car manufacturers. They have factories worldwide and distribute cars to different sectors, depending on where the factory is.
On the other hand, if your company opts for services offshoring, it means that your services will be located in another country. The most common services to relocate offshore are human resources, IT, administrative services, and the most common of them all, customer service. This last service is where call centers come in. Call centers are offshore companies with a significant infrastructure to hold up to thousands of employees working for the same business. They also pay their respective employees and provide them with the necessary training and equipment.
Cost advantage. As we mentioned in outsourcing, it is more affordable for US-based businesses to pay foreign employees who have a lower salary than US residents. This benefit is vital when handling manufactured products or service-based jobs. It reduces operation costs, increases revenue, and maximizes income. Moreover, you can pass on these benefits to the consumer and sell your products lower than the competition.
Tax benefits. Offshoring destinations offer many benefits to US or EU-based companies, such as tax holidays, fewer business regulations, and financial incentives. Countries like India, the Philippines, or Mexico have strong incentives to attract investing companies to their territory.
24/7 availability. Offshoring also provides your business with 24/7 assistance. Most offshoring sites are located in different time zones. You can obtain several call center contracts and work around your customers' schedules. Whether early in the morning or very late at night, offshoring provides full coverage.
Skilled labor. Offshoring companies offer skilled labor as part of their plan. Employees of these companies have worked in factories and call centers before. Providing them with a specific set of skills your company can take advantage of.
Culture. Unfortunately, hiring an offshore company has its downside. Offshore countries have different traditions and social customs dissimilar to the base country. In addition, accents can be troublesome with picky clients. You will have to go the extra mile when training offshore employees to avoid conflict in future transactions.
Language. One of the main drawbacks of offshoring tasks to other countries is the language barrier. Sure, English is one of the most spoken languages in the world, but there are also many levels when looking at the language academically. The offshore company you hire will be responsible for searching for the right prospects and ensuring their second language is viable to take care of your customers. If the language barrier is not settled, you may have problems where both parties miscommunicate what they intend to say to each other. Provide the offshore company with the necessary tools and tests to avoid this issue.
Quality Control. Essentially, you must provide the offshore company with quality standards they need to follow to achieve the final product. Sadly, the information may not be as clear as you might think. Factors like the weather, location, culture, or language may challenge hiring this type of company. The best way to avoid this is by having local managers onsite at the offshore site. They will study the difference between their previous experiences at the onshore location and try to resolve all the company's problems at their offshore location.
Outsource vs Offshore
Your customers should be your priority. When choosing between offshoring and outsourcing specific tasks, you must look at your customers and see what they would prefer. It is no secret that offshoring and outsourcing have received a lot of backlash over the years, and your company can pay the price of that backlash.
Remember to keep your data secure and decide what's best for your customers. But also what is best for your company. If you are having budget-related troubles, there are a lot of roads you can take to increase your ROI, like hiring virtual assistants or interns. Whether you choose to outsource or offshore, keep in mind the following sentence. Employees are a cultural asset to your company; take advantage of it.