What is Offshore Outsourcing Services: A Complete Guide

Running a business today has become more like an uphill battle, where you constantly strive to develop innovative products/services to get a competitive edge in the market.  

But when you don’t have access to skilled IT professionals and run out of budget, you won’t be able to scale your business or meet project deadlines. 

Whether you’re a budget-conscious startup or a large-scale business, investing in offshore outsourcing services is a game-changer for you. Not only does it give you access to specialized skills at a lower cost, but it also helps you create a high-quality digital product. 

Let’s talk about what offshore outsourcing services are and the benefits it can provide to your business. 

An Overview of Offshore Outsourcing Services 

Offshore outsourcing services refers to the process where a business hires a company situated in a foreign country for a particular set of tasks. After an agreement is set and acknowledged by both the parties, the outsourcer, and the contractor, the latter delivers the agreed services remotely. 

Offshore outsourcing can involve a variety of services like designing and developing a website, software development, DevOps, Maintenance and support of a project, and other such technical services. 

The demand for offshore outsourcing is expected to reach $389.7 billion by 2033. This indicates offshore outsourcing offers a promising future because of the sheer range of benefits it offers, such as faster time to market, lower development costs, and access to talented developers with extensive domain knowledge. 

More importantly, by hiring software developers from countries like India and Philippines, you can work with specialized IT experts who possess good communication skills and can create high-quality products at a lower cost. 

What are the Reasons That Businesses Invest in Offshore Outsourcing?

Offshore outsourcing isn’t a new concept anymore, and companies that have outsourced their software development projects have experienced an increase in productivity and produced better quality products at relatively low costs.

Here are several reasons that make offshore outsourcing a viable option for businesses:

Working with the overseas software development company can save you money that would have been spent on setting up a new office, buying equipment, hiring personnel, training them, and more.

You would also need to bear the insurance costs and fixed salaries for those employees.

Not only can American companies save costs, but they can also get exposure to talented IT developers who are available in abundance there.

Deloitte conducted a survey, and the findings state that India is considered the top outsourcing destination, with 59% of businesses outsourcing their software development projects to India.

For Instance – For years, Apple has been engaged in offshore outsourcing by partnering with a Chinese firm named “Foxconn”. The company is known for delivering quality electronic products which is possible because of its access to the right talent pool.

Through offshore outsourcing, businesses can delegate software development projects to external vendors living overseas. Thus, they can focus on strategic aspects such as creating strategies and making decisions.

2 Ways of Offshore Outsourcing

There are 2 ways through which offshore outsourcing can be done-

1. Development Centre 

An offshore development centre is an individual office with a team of engineers located abroad. A business or company branches out in another country, equipped with a pool of talent and leveraging lower costs.   

Deemed as a subsidiary of the main, parent company, a lot of tech companies are setting up their offshore research and development centres with a belief that offices with their people in foreign lands bring in more benefits than the conventional way of outsourcing.  

Businesses view it as an upgraded service or solution, especially in the IT sector. The country where the offshore development center is established typically has much lower standards of living compared to the parent company’s location. Therefore, businesses rely on the lower costs of resources.   

 2. Outsourced Product Development

While in the case of offshore development centres, a business establishes its research and development centre abroad, outsourcing product development means hiring a company located in a land other than your own, to carry out end-to-end or particular phases of a product development cycle. When the product’s development is undertaken outside the home country, it is known as offshore outsourcing product development.  

There are four types of offshore outsourcing:  

1. Information technology outsourcing (ITO)  
2. Business process outsourcing (BPO)  
3. Offshore software development  
4. Knowledge process outsourcing (KPO)  

Offshore outsourcing allows businesses to unlock proficiency, in addition to the expertise of a talent pool across the globe. The cost of opting for outsourcing product development to an overseas company is lower than hiring a local product development service provider. For instance, businesses belonging to developed countries like Canada and the USA hire offshore companies from developing places like India and China to get optimal results at relatively lower rates.  

What are Different Types of Offshore Outsourcing Services Available? 

There are four types of offshore outsourcing services:

1. Information Technology Outsourcing (ITO)

IT outsourcing is the process through which you delegate IT-related tasks to an external vendor located in a different country. The tasks can be anything from developing software to managing infrastructure and providing maintenance and support services.

2. Business Process Outsourcing (BPO)

When a business outsources non-IT related tasks such as backend operations, finance and accounting tasks, and customer support to an offshore outsourcing partner, it’s known as business process outsourcing.

For example – Amazon, being a multinational company that deals in a wide range of services such as media, streaming services, electronics, and cloud computing, offshores non-core business activities such as customer support solutions.

Generally, countries like India and the Philippines are considered hubs for offshore outsourcing because of lower costs.

3. Offshore Software Development

This is related to outsourcing projects in the software development domain such as mobile app development, UI/UX design, or website development. Companies do so to find tech talent who possess domain expertise in specialized areas.

On top of that, they get access to abundant talent, ranging from top-rated programming skills to high-level English proficiency.

For example – Cisco, a multinational company, has created offshore development centres in India. They even set up a research and development centre and hired 1,500+ tech professionals who can create and market innovative products faster and meet the changing demands of customers.

4. Knowledge Process Outsourcing (KPO)

Knowledge process outsourcing is a way where businesses can outsource high-level activities to offshore vendors. These activities can be related to business analytics, market research, and consulting. Businesses opt for KPO services to improve their business efficiency and increase their revenue.

For Instance – For providing a better user experience to your customers, you may outsource UI/UX design services to a KPO based in another country. This means you can focus on core aspects of your business without worrying about paying fixed salaries to your staff.

Benefits of Offshore Outsourcing  

Offshore Outsourcing is important for the following reasons:

1. Focus on Core Competencies 

Outsourcing helps business access proficiency and since the task that is outsourced is the core competency of the service provider, they would give the most optimal results. Offshore outsourcing services further help business to solidify their core competencies, reduce the work stress/ workload of in-house teams and complete the project on time at a faster pace. 

By hiring an offshore outsourcing service provider, business identify their key differentiators and work hard on them to create a firm position for themselves in the marketplace.  

For example, few development partners have extensive experience in specific vertical such as E-commerce. With their expertise and experience of working with many clients, they become capable of not only smooth sailing through their work but also share industries’ best practice that will be very fruitful for your business. 

2. Cheaper Labor 

The costs of living, and wages in developing countries that act like offshore companies for developed companies, are relatively low and hence assist the latter with outsourcing services for less costs. For instance, a good developer may cost more than 100 dollars per hour in Canada and USA while a developer with similar skill set may cost anywhere from 30 to 80 dollars per hour in India. 

Furthermore, many foreign companies benefit from the highly skilled and dedicated talent found in these countries, which is an added advantage.

3. Skilled Workforce

While in most cases, businesses opt for offshore outsourcing services to get skilled resources from developing countries at lower rates on board. There are other times when businesses also go for offshore outsourcing services to leverage the expertise and industry experience of a third-party vendor.    

Noida, India is very popular and extensive market for staff augmentation developers as companies here mainly work with mid-size companies and startups and provide them with dedicated developers, when required. 

4. Increased Efficiency  

Sometimes internal team members lack the skills and expertise to deliver the new project. It’s very difficult for developers to keep updating themselves with new skills and as a result of all, efficiency is sacrificed. Often a dedicated skilled resource in a specific tech stack can, in addition, help deliver new projects on a super-tight deadline.  

5. Around-the-Clock Support

Hiring an offshore outsourcing team means constant, round-the-clock support offered by experts. In fact, the internet has successfully connected the globe and widened the standard business hours. Thus, it is implied that if any major problems with technical services are faced by the client, they can be resolved immediately by getting in touch with the developers at any hour.   

In case, where you need to provide support for the Graveyard shift, you may contact someone from a different country and time zone that can help you and ensure they take the headache of providing support during grave hours.  

6. Less Regulative Bottlenecks

Offshore outsourcing services also allow businesses to benefit from flexible or less stringent laws of land binding the overseas outsourcing service provider company.  

How BigOhTech Can Help You with Offshore Outsourcing? 

With offshore outsourcing services, ROI is quick and high, and businesses gain a competitive edge.

BigOhTech is one of the most sought-after offshore outsourcing service providers. Globally recognized, we ensure that our clients get world-class services and products.

Our offshore development center seats a pool of some of the most highly qualified and specially trained experts, supported by the latest, well-designed IT infrastructure.

With expertise in mobile technologies, software development, and cloud computing, BigOhTech acts like an incubator for companies to develop and flourish.

Want to know how we helped one of our clients who deals in the energy domain through our offshore development services?

Read this case study to know how we scale their development process and free up their staff to focus on core areas of business. Results? The client saved 30% of the time and cost that would otherwise be spent on hiring additional resources and training them.

FAQs

Q1. What does Offshore Outsourcing mean in business terms? 

Offshore outsourcing in business teams means hiring a third-party vendor to carry out business processes, system services, product or software development, or to contract out parts of a business task. 

Q2. How does Offshore Outsourcing work?   

Offshore outsourcing involves identifying the business needs, defining the scope of work, followed by asking for a proposal, selecting a vendor, negotiating and procuring the contract, project initiation, service delivery, and exiting the contract.

Q3. Are there any risks in offshore outsourcing services?   

Offshore outsourcing has its pros and cons. While security risks, lesser control, and different time zones are some of the drawbacks, they are not major bottlenecks and can be easily worked around. 

Q4. What do businesses need to consider when doing offshore outsourcing?

When hiring an offshore outsourcing partner, they need to have clear expectations and decide the communication channels beforehand. Make sure that the offshore company should be able to meet project deadlines and work harmoniously despite different time zones.

Q5. How to find a good offshore outsourcing company?   

A good offshore outsourcing company should be one with considerable industry experience, domain expertise, and up-to-date IT infrastructure. The development team should be skilled and proficient. It should have the potential to innovate and deliver on a timely basis. Furthermore, it should be aligned with your business goals from the very beginning and provide support throughout the life of a product or keep your application or software up and running.   

Read through the blog to know the important points to consider while selecting a good offshore outsource product development company.

Q6. Why do most companies prefer India for offshore outsourcing?  

India is the top choice for offshore outsourcing as it has the best IT talent, skilled and motivated IT experts, and offers low development costs making her an attractive destination for offshore projects.