Business process outsourcing is quite a common practice among giant corporations based out of developed nations. It refers to contracting out business processes, especially IT, to an external company located in a different country, where the labor cost is low and the availability of skilled professionals is high. When the processes are outsourced to a firm located in a neighboring country, it is termed as ‘nearshore outsourcing’, and when the outsourcing firm is located in a distant country, it is referred to as ‘offshore outsourcing’. Both types are widely practiced these days due to multiple reasons. One of the primary reasons is that offshore outsourcing helps companies cut down labor costs, reduce their production costs and attract more customers by offering them services/products at reasonably low MRPs.
However, a business owner must choose its outsourcing partner discreetly. The selection process must start with reviewing the portfolios of the shortlisted outsourcing firms (offshore or nearshore). Their previous work should be checked, and testimonial sections must be scrutinized to get an idea of what their prior clients say about their services. Different online forums, where organizations share their experiences of working with different outsourcing firms, must be checked. The overseas locations and infrastructure of all the shortlisted firms need to be verified and checked respectively. One must analyze the experience and expertise level of each firm, and check which one/all is/are giving an assurance of complete data confidentiality, which protects a company’s intellectual property. Also, while choosing an offshore outsourcing partner, a business owner must keep in mind that confirming cultural compatibility is necessary. This is because, a smooth workflow and long-term symbiotic relationship between an outsourcing firm and its client can be ensured only when the former understands the latter’s organizational structure, employees, and work culture. Before signing an agreement with the finalized outsourcing partner, one must check its insurance policies, as the liability of an organization depends on whether it has insurance coverage or not.
When it comes to picking the right outsourcing location, one must analyze the tax regime of a country and the other economic factors that contribute to the labor and service costs. Also, one should consider a country that best caters to the skill set his/her business requires. For example, companies looking to outsource IT processes must pick India, Poland, or Mexico. Some countries’ government laws and regulations encourage outsourcing. Hence, business owners must conduct thorough research to find such countries and include those in their list of preferred offshore outsourcing locations. Linguistic and cultural differences between a company and its outsourcing partner might lead to various miscommunications and turmoil. Therefore, a company looking for an offshore outsourcing partner, based in a distant location, must select a firm that has multilingual capabilities.
5 popular outsourcing locations:
India is one of the most popular outsourcing locations because the average salary and cost of living in this country are comparatively low. Also, skilled labor is available in abundance here. Besides, India has the second-largest English-speaking population in the world and the education system followed in the country highly focuses on science and technology. Hence, it is one of the most preferred offshore outsourcing locations for businesses looking to outsource IT processes like software development, software engineering, etc.
The Philippines is another popular outsourcing location due to the high English fluency of its residents. This helps Filipinos perform well in customer service jobs for companies that mostly have English-speaking customers. Also, the tax laws of the country are outsourcing-friendly. To help businesses as well as outsourcing companies receive tax exemptions, the Philippines government has introduced the Philippine Economic Zone Authority (PEZA). Software development, BPO services, IT outsourcing (Information Technology), etc. are eligible to get PEZA registration.
Ukraine was recognized by the Global Sourcing Association (GSA) as the ‘Delivery Destination of the Year 2021’. The primary reason Ukraine has gained popularity as an offshore outsourcing location is that the government is preparing the country to become an IT leader in the world. Research says, every year, more than 30,000 tech graduates join the country’s developer community. For companies based in European countries, Ukraine is a great outsourcing location due to the similar time zone.
Like Ukraine, Poland is another Eastern European country that is known for having one of the biggest IT markets in the world. Besides, Poland constitutes specialized talent in finance and accounting. Outsourcing companies based in Poland strictly comply with EU standards like GDPR for IP and data security. Hence, the country is also considered a popular investment destination for IT companies. The buoyant, well-diversified economy of the country is another reason businesses choose to pick Poland as an offshore or nearshore outsourcing location.
A popular nearshore outsourcing destination for companies based in the U.S., Mexico witnesses a higher employee retention rate and is yet to be completely exposed to the international outsourcing market. Due to its proximity to the U.S., this Latin American country operates in a similar time zone. This leads to smooth outsourcing collaborations. HR, customer services, and IT services are the most commonly outsourced processes to Mexico.