In this episode, we explore the pros and cons of global and local outsourcing, from accessing a wider talent pool to dealing with cultural differences. We'll also reveal the key factors that businesses need to consider when making their outsourcing decision. So, if you're looking for practical guidance on how to outsource effectively, tune in now!
Hey there! It’s Adam from Outsource HQ. For today’s episode, we’re going to help you decide what’s better for your business: outsourcing globally, or locally.
But before we get started, let's quickly review what outsourcing is.
Outsourcing means delegating your business tasks to a team outside your company. This means you get to complete tasks and achieve your goals faster without wasting time and money looking for and hiring new people. Brilliant, right?
There are two ways to do outsourcing: domestic outsourcing, and global or international outsourcing. What’s the difference?
Domestic outsourcing is when you outsource tasks to people outside your business who reside in your country. It’s also called onshore outsourcing. All tasks are outsourced to individuals not employed by a corporation but who live in the same country as you.
Meanwhile, global outsourcing, or offshore outsourcing, is when you outsource tasks to a company that has a team of experts located outside the country.
You might ask, “What’s better, then? Domestic or global outsourcing?”
That, we can’t decide for you, but instead, we’re here to help you! Gear up your decision-making skills because we’re going to weigh the pros and cons of each type.
Let’s start with the pros of global outsourcing.
#1: A larger talent pool.
When you outsource globally, you access a set of expertise that may not be found in your locale– for example, most marketing agencies are in big cities, and you might be operating far from the city– or at lower rates than in your country. This is excellent, especially if you're looking for new ideas and a different way of doing business.
#2: Lower labor costs.
Speaking of lower rates, saving money is one of the major benefits of global outsourcing. The majority of international specialists have much lower rates than domestic rates.. You could pay much less while still acquiring equal talent and skills.
#3: More flexible depending on agreed-upon terms.
With global or offshore outsourcing, it's easier to scale your workforce according to your business demands.
If you have short-term tasks and you need additional labour, you won't have to worry about hiring new employees or terminating their employment agreements once the task is finished. Outsourced talents are flexible, and all things depend on the terms you've agreed upon.
With access to a large pool of talent at very affordable costs, you can quickly scale up production by employing a sizable workforce for your outsourcing needs.
Global outsourcing offers a great deal of benefits to your business, right? But! you still need to consider the other side of the coin.
What are the cons of global outsourcing?
#1: Cultural and language differences including international industry.
Working with people from a different country does have potential language and cultural barriers. Even in countries with competent English skills, there could still be a few communication issues because of different cultural nuances.
This can affect day-to-day communication, and simple misunderstandings on body language or humor might escalate into arguments between team members.
This con is a small disadvantage, and it’s not present at all when you pick a good agency who trains their specialists for communication across worldwide cultures.
#2: Risk of intellectual property theft.
Whenever you share important business information, you put yourself at risk of theft. Offshore locations are even farther away, so the risk increases. Patent protection is usually country-specific, and you'll have to go through paperwork and invest resources to acquire this protection.
Additionally, regardless of where your clients are, their data may end up being held on servers in offshore locations. Your security can be compromised if other countries’ data protection regulations are weak.
You can have NDAs for this. In USource, we have NDAs. It keeps things professional and gives mutual assurance.
#3: Less control over the work done
The remote aspect brings significant daily challenges. Aside from cultural differences and language barriers, your internal staff and your outsourced team may suffer from sharing and receiving too much or too little information than needed, especially on important tasks.
Schedule conflicts happen, and teams may start working separately without knowing what’s happening in other teams. You can also have trouble assessing your offshore employees’ productivity and the quality of their work.
This is easily resolved through communication and streamlined systems. Both your onshore and offshore teams can collaborate easily on platforms like Trello, ClickUp, Slack. Set up FAQs, SOPs and channels relevant people can update and access for information about tasks.
Now that you know the pros and cons of global outsourcing, let’s move on to domestic outsourcing. Listen carefully as you weigh your options.
So, we’ll start with the pros!
#1: Easier communication
One of the key benefits of domestic, or onshore outsourcing is that you won't have to adjust to new cultures, language barriers, and time zones. When you outsource locally, you'll work with an outsourcing company located in your country, in the same work hours, and familiar with local business practices. Communication is much easier.
#2: You support local businesses
When you outsource tasks to experts and companies located in your country, you can proudly say you support your fellow citizens' jobs, and local businesses in your area. Even if just a little contribution, this can help improve your country’s employment opportunities.
Also, when you choose onshore outsourcing, you'll have the chance to build lasting relationships with other businesses in your country. Your outsourcing partner may connect you to other domestic suppliers, providers, and perhaps even clients.
#3: Better control
Domestic outsourcing gives a higher level of control and closer contact with your outsourcing partner. Domestically outsourced partners are more accessible and can be easily contacted for any unexpected problems that require a quick response.
Domestic outsourcing also makes it simpler to handle quality control issues. If you have to teach an outsourced supplier or service provider to operate in a specific way, it is easier to meet in person to discuss the requirements. You can also give feedback and avoid misunderstandings when you talk face-to-face.
Domestic outsourcing really flexes its advantages! But to make a sound decision, you need to know the disadvantages.
So, what are the cons of domestic outsourcing?
#1: Limited talent pool
If you're looking for fresh, creative ideas and out-of-the-box thinking, domestic outsourcing might not be the best choice for you. Because they received similar training from similar people in your area, local outsourcing companies may share similar thought processes. In other words, depending on what you're outsourcing, you might not be receiving as much originality as you'd want.
#2: Higher potential for conflict of interest
When you hire an onshore team, they learn your business’s goals, processes, and other important information. That’s where conflict of interest may happen. Since they know how your industry operates, they might want to work for your competitors, or they might contact your clients directly.
And this is easier for onshore teams to do than offshore because you reside in the same country. Your competitors and clients are more accessible, and your onshore team knows how the local market works, which can appeal greatly to your clients.
The best solution to this problem is a non-compete agreement. Discuss this with your onshore team and let them sign the agreement to ensure that they wouldn’t work for your competitors, or take over your clients.
#3: Higher labor costs
No doubt, offshore teams are among the most inexpensive teams out there, followed by freelancers and remote staff.
And that's one major disadvantage of domestic outsourcing: they're more expensive. You probably won't experience any significant cost savings due to high labor costs, high infrastructural costs, and less preferential tax benefits.
You can outsource to a company in a low-cost area of your country, but the cost savings won't likely be as high as in well-known offshoring locations.
So there you have it. Now that we have dived into the pros and cons of domestic and global outsourcing, have you decided what’s best for your business?
Outsourcing is a big step, even if it’s now simpler than ever, and you want it done right. Consider other important factors of your business, like:
Whether it's domestic or global outsourcing, there will always be benefits and drawbacks. But ultimately, it depends on the terms and conditions signed upon, how well you manage and communicate with your team, and how you monitor the end results.
That’s all for today’s episode! Thanks for listening. Stay tuned as we talk about getting out there with your remote agency! See you then.