Offshoring is no stranger to businesses. It is very much a reality and companies have embraced offshoring for varied reasons. One of the most notable benefits of offshoring enjoyed by organizations is its cost-effectiveness. Thus, this aspect of offshoring has increased its demand among several organizations.

In layman's terms, service offshoring is the relocation of service activities from the domestic economy abroad. Analogous to the offshoring of goods and services encompasses activities in the form of FDI and independent suppliers of offshore outsourcing. It may include a sourcing strategy in service networks as well as manufacturing value chains.

The offshoring of jobs and infrastructure had become a significant factor in global economic development in the mid-20th century. Companies initially focused their outsourcing efforts on low-skilled or unskilled manufacturing jobs and simple assembly tasks but later broadened their horizons.

Potential advantages of offshoring:
  • Lowers labor costs: One of the potential advantages of offshoring is that businesses could save money by hiring foreign workers to do the same work for less money than it may cost in their country using local resources.
  • Establishes new markets: Setting up an offshore presence may enable a company to broaden its customer base to other countries.
  • Enhanced knowledge of overseas markets: Foreign employees offer a better understanding of the global trends, markets, business risks, and cultural norms in their country as compared to the local employees.
  • Alternate tax and regulatory benefits: Several countries offer tax breaks and financial incentives to entice foreign companies. In this way, offshoring enhances employment opportunities in these nations.

Offshoring Value-Added Services

Gone are the days when core business processes were the focus for offshore sourcing. In a recent study, results show that most organizations offshore their back-office services and other value-added tasks. They deliver these processes to their offshore partners for two reasons:

  • Satisfactory performance from offshore partners
  • More savings on operational costs

Moving along with the trend, offshore service providers are now offering a diversity of services other than conventional ones. The significant value-added services that are being outsourced are the creatives or the graphics and web development tasks, marketing, payroll, and accounting.

Entrepreneurs Invest in Outsourcing or Offshoring

Growth is contagious and everyone wants to be part of it and offshoring is no different. Organizations set up one-stop shops for businesses looking to offshore their processes or services. In recent market research, some companies are offering data entry services, BPO centers, seat and employee leasing, office spaces, and marketing tasks. Others also invest in hiring virtual assistants for those who need them. This shows how diverse offshoring can be when given a chance.

Companies can get rid of a process completely

Over the years, companies have learned that they can let go of some of the processes they are offshoring. Don’t take this the other way — this means that organizations are letting go of smaller processes to be able to put a laser focus on what generates the numbers. E.g., offshoring back-office data entry solutions. With this practice, clients confidently leave tasks offshore while they take care of the core business processes.