Offshore outsourcing definition
What is offshore outsourcing?Offshore outsourcing refers to the practice of transferring some functions of your business to a company in a different geographic location, particularly offshore destinations like the Philippines, India, and Malaysia.
Organizations usually use this strategy to access a wider talent pool at a low overhead cost without sacrificing the quality of work done.
Offshore outsourcing helps strengthen a business's performance and compete with other organizations in the industry.
To do this, companies partner with established and trusted outsourcing service providers to ensure high work quality and accountability.
Partnering with a trusted BPO provider assures organizations the following:
Employees who underwent a thorough interview process to ensure suitability for the needed role
Workers going through proper onboarding, training, and upskilling sessions
Satisfied employees, since they will be provided with high-quality equipment and a Class A physical office
Accountable and manageable upper management
Clear targets and KPIs for the offshore team
Efficient processes and standard operating procedures
Legalities and other documentation to be well taken care of, among othersFurther, offshore employees can help manage essential business operation tasks, which means you and your in-house employees have more time to focus on your own responsibilities.
This boosts focus, productivity, and employee fulfillment — all while the company saves up to 70% on labor costs!
This article aims to provide a comprehensive understanding of what offshore outsourcing means and provide examples of its many benefits.
We will also discuss the history of offshore outsourcing, learn why businesses resort to offshore staffing, discover its pros and cons, as well as learn the types of offshore staffing.
Offshore outsourcing definitionOffshore outsourcing, also referred to as business process outsourcing (BPO), is the process of having work done for your business using qualified staffing solutions from countries with lower labor costs.
Commonly, IT, sales, and administrative roles are carried out for businesses across the world from countries such as the Philippines and India.
Companies can benefit from accessing other countries that have more resources for people with specialized skills. At the same time, they get quality work at a fraction of the costs.
Like nearshore outsourcing, companies prefer having minor tasks outsourced to a service provider so that the in-house team can focus on the core business functions.
One perk of offshore outsourcing for businesses is that they do not need to think about the overhead expenses when they hire domestically.
Overall, the company could benefit from lower human resources costs, equal or higher-quality outputs, and higher profits.
About offshore outsourcing Offshoring history Benefits of offshore staffing Why do businesses resort to offshore outsourcing? Offshore outsourcing examples What services you can outsource Pros and cons of offshoring Pros of offshore outsourcing Cons of offshore outsourcing Offshore outsourcing in the Philippines Types of offshore outsourcing Offshoring historyDeploying manufacturing jobs out of the country has been a common business method since the 1960s.
This well-known business strategy started with outsourcing. Outsourcing is when an organization farms out parts of its business processes to an external company.
While it may seem like a current phenomenon to many, the truth is it has been going on since the 1950s.
However, it wasn't until the 1980s that corporations perceived it as an effective business strategy. It was also in that year when companies mainly outsourced to allow them to have a greater focus on their core competencies.
Then in the 1990s up to the early 2000s, organizations started to concentrate more on the cost-saving measures of outsourcing.
Now, this is the time when strategic outsourcing has emerged, and the goal is to gain a competitive advantage in the industry.
Fast forward through time, given today's technological advancements, it is easier for companies to delegate both their core and non-core functions to the external workforce in different countries.
Offshoring revolutionizes organizations and how they perform their daily operations. It transforms business landscapes into agile structures that boost its overall profitability.
Benefits of offshore outsourcingThe world is becoming increasingly globalized. Technology, software, and communications improvements now enable easy access to a globalized workforce.
This has many advantages, but the primary benefits of offshore staffing are:
Cost savingsOne of the leading reasons for offshore outsourcing is the potential to reduce labor costs. Companies can take advantage of lower wage rates in other countries, which can significantly impact the overall cost of production or service delivery.
Also, some countries may have lower infrastructure and operational costs, contributing to overall cost savings (typically 60%-80%).
Access to global talentOffshore outsourcing allows businesses to tap into a global talent pool.
Companies can access specialized skills and expertise that may not be readily available in their home country, leading to improved product or service quality.
Focus on core competenciesOutsourcing non-core functions enables companies to concentrate on their core competencies. This strategic focus can enhance efficiency and productivity, as resources are directed toward areas that contribute most to the organization's success.
Time zone advantageOffshore outsourcing can provide a time-zone advantage. Companies can create a 24/7 working environment by leveraging the time differences between their home country and the offshore location.
This can result in faster project turnaround times and increased productivity.
Flexibility and scalabilityOutsourcing allows businesses to be more flexible and scalable. They can easily scale up or down their operations based on business demands without the challenges of hiring or laying off in-house staff.
Risk mitigationOffshore outsourcing can help spread business risks. Diversifying operations across different geographical locations can reduce the impact of local economic or political fluctuations on the overall business.
Innovation and technologyAccess to global talent often brings in diverse perspectives and innovative ideas.
Outsourcing to locations with advanced technological capabilities can also result in the adoption of the latest technologies and methodologies.
Faster time-to-marketOffshore outsourcing can accelerate time-to-market for products and services. With a global team working on different aspects of a project simultaneously, companies can bring their offerings to market more quickly.
The benefits of offshore staffing impact small, medium, and large enterprises across the globe. Businesses can access more affordable resources to help streamline and grow their business. This is a win-win for all parties involved.
Despite these benefits, it's crucial for businesses to carefully evaluate the risks and challenges associated with offshore outsourcing, such as cultural differences, communication barriers, and potential quality issues.
A well-planned outsourcing strategy that aligns with the business goals and values is essential for success.
Why do businesses resort to offshore outsourcing?Companies do not just switch to offshore outsourcing due to its cost-effectiveness.
Rather, more and more companies these days are acknowledging the other relevant advantages of offshore outsourcing to the market:
To save up to 70% on labor costsBusinesses always have to look for ways they can obtain a stable stream of revenue while sustaining their daily operations.
However, because of the economic fluctuations and its unpredictability, other companies couldn't afford the costs of local operations. This is where offshore outsourcing can come in handy.
To stand out in a sea of tight competitorsAnother reason for offshoring is to stay competitive, especially with the global economy.
Like for example, with customer service, businesses are able to boost their efficiency and daily operational procedures with this strategic practice.
To keep up with the latest business trendsEntrepreneurs in this day and age know well enough that innovation is one key factor in their overall success. Thus, it is more achievable with offshoring.
To leverage professional and highly competent offshore staffOther companies also resort to offshoring as a result of the lack of qualified local workers to do specific tasks. Countries like Australia experience skill shortages in the automotive industry.
It was the same as with the United States when Apple had to transfer its manufacturing to China due to the lack of a local labor force.
Offshore outsourcing examplesBusinesses of all sizes rely on offshore outsourcing to delegate tasks to lower-cost countries but of equal expertise.
Just like nearshore outsourcing, companies prefer offshoring several roles so that the in-house team can focus on the vital functions of the business.
Here are some of the most popular offshore outsourcing examples:
Customer service departments through offshored call centersOne popular example of offshore outsourcing is customer service through call center companies. Every company needs a customer service department to cater to customers' needs, but these operations can get very pricey.
As a business grows, more people are needed to handle queries and maintain customer satisfaction. Having an in-house customer service team may not be the best decision.
From coming up with standard operation procedures to staff and management training, running a customer service department alone can take so much time and effort, not to mention resources.
This is why offshore outsourcing of customer service roles and departments has become the norm
Virtual assistantsAlmost anything can be done online:
Need to book personal appointments or work meetings? It can be done online.
Need to delegate social media posting and graphic design activities? Do it virtually.
Need to develop codes for your website and/or mobile app? Outsource it online.Almost everything can be done online, so business owners and companies offshore outsource tasks to general Virtual Assistants (VAs).
Offshore outsourcing tasks to general VAs has been a major game-changer, especially for small businesses. This is because outsourced staff ensure quality work while saving a lot of resources.
What services can you offshore?Aside from manufacturing, organizations these days are able to farm out both their core and non-core functions to offshore providers.
One example of this is foreign companies that have been offshoring their call center in the Philippines. We all know that the country is known as the Business Process Outsourcing (BPO) capital of the globe and is well known for call center services.
However, aside from customer service and support, Information technology (IT), related job functions are also some of the leading offshored services.
In fact, according to statistics, the global IT outsourcing market is expected to be worth $98 billion from 2020 to 2024.
A lot of foreign companies have also tapped into offshoring their human resources tasks such as sourcing, hiring process, and more. More so, finance and accounting-related tasks like bookkeeping, tax filing, procurement processes, etc.
In terms of sales and marketing, offshore outsourcing companies like Six Eleven BPO offer global strategic solutions for different types of industry sectors.
Some of their services may include lead generation campaigns, industry and market research, and search engine optimization, among others.
Basically, companies can offshore nearly every part of their daily business functions to offshoring providers from around the world. This has been made even possible with the help of our modern-day technology and the availability of the internet.
Pros and cons of offshoringNaturally, offshoring will always have its mix of advantages and disadvantages. Having said that, let's see whether the benefits of offshoring outweigh its downsides:
Offshoring pros Reduced labor costsOne good example of this is US companies that offshore to developing countries like the Philippines.
This allows them to reduce their overhead costs as Filipino workers have low compensation as compared to those hiring local in-house employees.
Availability of a skilled workforceAs we have mentioned earlier, one of the reasons why organizations offshore is the lack of skilled labor. Offshoring to countries like the Philippines and India grants international companies access to a skilled talent pool.
Both these countries have seasoned global talents who are English proficient and college degree holders.
24/7 operationsForeign companies that offshore to another country with major time differences allow them to have their daily operations overextended hours.
Like in most cases customer services, these foreign companies are able to extend their contact center services even up to twenty-four hours.
Increased focus on the business coreAs businesses free up more on their job loads, this gives more time for leaders and in-house staff to focus on improving their core functions.
You can rely on a trusted outsourcing partner like HireSmart Staff to build a highly-skilled team to perform other tasks needed in your company.
It is also important to note that organizations that offshore are not just on the receiving end of this practice's perks. In the Philippines, the BPO industry plays a huge role in terms of its economic growth.
The country's BPO industry employs a lot of the working population in the Philippines.
Offshoring cons Language barriersThis is perhaps one of the major drawbacks of offshoring. Usually, in countries like India and China, the English language isn't the locals' first language.
Another factor is when the offshoring provider comes from a region with a strong local accent.
Cultural differencesWhen offshoring to different countries, cultural and social differences are unavoidable.
For example, US business leaders may talk in a straightforward and candid manner, while a Filipino remote staff may be more reserved.
Quality controlAnother concern for foreign companies is that offshoring also means that they will be giving up control over their offshored tasks.
Even if these clients provide quality guidelines, there will still be differences in terms of the working culture and environment.
Despite these cons, businesses still consider offshoring as a good business model for organizations of all shapes and sizes. Going back to offshoring to the Philippines, the country has ranked second among Asian countries with the highest English-speaking population.
More so, the country is also heavily influenced by Western culture as it has been colonized by the US and Spain for years.
Offshore outsourcing in the PhilippinesThe Philippines is the leading offshore outsourcing destination in the world.
With 1.3 million BPO workers and counting, large corporations and even small to medium-sized enterprises all over the world trust that their Filipino workers and remote teams can provide excellent outputs, customer service, or IT assistance at a cost-effective price.
Outsource Accelerator provides you with the best customer service outsourcing companies in the Philippines, where you can save up to 70% on staffing costs.
We have over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2500+ BPOs, all designed to make it easier for clients to learn about and engage with outsourcing.
Types of offshore outsourcingHere are some types of offshore outsourcing, as listed by Rezaid:
There are many popular approaches and solutions that are used by businesses today – each with its own benefits and drawbacks. The right offshore outsourcing type will depend on your specific requirements as well as the nature of your project.
Here are four different types of offshore outsourcing:
Production offshoringThe actual movement of the physical manufacturing process overseas, generally at a significantly cheaper cost in terms of personnel and materials, is known as production offshoring.
Front-office and back-office processes and functions are the two primary types of offshored processes and functions. Customer service, inbound and outbound telemarketing, virtual assistants, and technical assistance are all examples of offshore.
HR and recruiting, accounting and bookkeeping, mobile and web development, and design and graphics are other examples of production offshoring.
System services offshoringInformation technology (IT) will be a key subject to get right given the multiplicity of procedures and minute-by-minute activities of any corporate operation.
In the 1990s, a huge amount of communication infrastructure allowed nations like India, which has a big pool of English speakers and a technically skilled workforce, to lead the sector by luring companies like HP, IBM, Microsoft, Oracle Corporation, Intel, and Cisco.
Innovation and software offshoringAsian countries lead the world in computer science and software development services. High-tech product companies, including those in Silicon Valley, have begun to offshore innovation work to Colombia, Belarus, South Africa, Mexico, and Ukraine.
Using these countries' highly trained labor pools results in considerable cost savings and faster production cycles.
ReshoringReshoring, also known as back shoring or inshoring, is the opposite of offshoring. Companies like Google, Facebook, and Amazon have been criticized in Europe for allegedly concealing income and avoiding taxes.
They reportedly did this by booking non-US earnings from major advertisers through its Dublin branch in low-tax havens like the Republic of Ireland.
As a result, in January 2018, it started to book those earnings and pay taxes on those profits in the countries where they were generated.
Want to learn more about outsourcing? Check out the Inside Outsourcing book as well as the Inside Outsourcing book review today!
What is Back Office?
What is a back office?Back office is a term used to classify business activities that are not directly attributable to frontline customer support, sales, and services.
Its functions relate to administrative functions that do not directly generate income or are accessed by customers but are necessary to streamline the other processes involved in a business.
The back office can be thought of as the non-customer-facing element of a business.
Back office tasks include but are not limited to the following: data entry, account processing, website content management, data verification, mediation, graphic design, writing and editing services, accounting and financial services, and quality assurance.
These functions are necessary to a business yet incur additional costs. Some companies find back office jobs costly because they require a substantial amount of capital for recruitment, salaries, and employee benefits.
The back office function is often described as ‘non-core,' which means that it does not directly support or contribute to the achievement of the business's financial or strategic objectives.
Although back office functions are often considered to be less strategic than front office roles, they are nevertheless essential for every business, large or small. The majority of back office tasks are performed by administrative staff and are therefore considered routine work.
Still, without the efforts of the back office, the organization would cease to operate properly, thus affecting the front office and overall customer satisfaction.
Back office employees typically do not interact directly with customers or clients. Instead, they handle internal operations that are often more complex than those handled by front-office personnel who deal directly with customers.
They are also responsible for ensuring that all company business functions run smoothly and efficiently.
Back office operations are typically highly repetitive, making them an ideal target for cost savings opportunities. However, the nature of this type of work makes it difficult to automate and streamline.
Automating these processes can be especially challenging because of their highly fragmented nature and the large number of different users involved. The result is that many back office processes are still performed manually.
To ensure that your manual back office processes are done efficiently, you can consider outsourcing.
Back-office functionsThe back office is the cornerstone of any company's financial and operational success. As a result, it often generates less revenue than the front office.
The traditional back office tasks are divided into two categories. These are the administrative operations that keep the firm functioning and the customer support functions that directly fulfill customer services and demands.
Modern back office functions are the behind-the-scenes tasks that support a company's front-line operations.
These include operations such as supply chain management, procurement and logistics that are necessary to ensure an organization can meet customer demand in a cost-effective way.
Further, a modern back office model is one where all departments work together towards a common goal – delivering value to customers at the lowest possible cost.
In this model, no department is seen as more important than another, and none has more power than another either
The traditional approach to managing an organization involves separate departments focusing on their own specific goals with little consideration for what other departments may need from them or how their actions might impact others' performance
These functions frequently carry out significant, multi-step processes in which more than one individual or functional group contributes to the fulfillment of the business process.
Administrative functionsAdministrative back office functions are essential to the smooth running of any business. These roles include:
Human resources
Project management
Accounting
Legal
Data entry
Virtual reception
Market research
Inventory control
Website management
Basic admin duties Customer support functionsCustomer support is one of the most important back office functions in any business. It is a process that helps customers get answers to their inquiries, solve problems, and resolve issues with a company's product or service.
These tasks include:
Handling complaints and irate customers
Providing information and answering questions about products or services
Answering questions about payment plans and refunds
Technical support
Ensuring customer satisfaction
Customer relationship management What are back-office jobs?A company's back office operations are formed of several functions, and below are some examples of back office jobs and their key responsibilities:
Financial assistantA financial assistant is in charge of assisting a company's finance department. They are responsible for various tasks in the office, such as data entry, balance sheet generation, accounting, and keeping financial records up to date.
Because they mostly work on the company's accounts, financial assistants must be detail-oriented, well-organized, and analytical.
The following is the updated 2023 salary comparison of paying for an in-house and outsourced financial assistant.
Financial assistant
Monthly rate of Filipino staff
Monthly rate of in-house staff Entry-level
$470
$2,883 Average
$630
$4,069 Experienced
$1000
$5,700(Sources: Talent.com, Indeed.com)
HR assistantHuman resource assistants are in charge of organizing appointments, keeping records, and onboarding new employees.
Among several other tasks, they handle payroll keep attendance records, and usually help the human resources manager. Employees in this field must be trustworthy, organized, and have effective communication skills.
Here is a quick comparison to see the difference between paying for an in-house and outsourced HR assistant.
HR assistant
Monthly rate of Filipino staff
Monthly rate of in-house staff Entry-level
$450
$2,214 Average
$640
$2,992 Experienced
$900
$4044(Sources: Talent.com, Indeed.com)
Data analystData analysts are in charge of interpreting data, analyzing data, and putting data-gathering systems in place. They also create reports and provide assistance for the data warehouse.
Data analysts must be competent mathematicians with good problem-solving abilities and the capacity to manage information efficiently.
Here is a quick comparison to see the difference between paying for an in-house and outsourced data analyst.
Data analyst
Monthly rate of Filipino staff
Monthly rate of in-house staff Entry-level
$522
$3,323 Average
$641
$5,091 Experienced
$1,099
$7,766(Sources: Talent.com, Indeed.com)
Financial analystFinancial analysts are in charge of various financial activities on behalf of external or internal clients. Their responsibilities include estimating operating expenses, producing reports, and maintaining a database.
In order to stay excellent in this job, applicants must be skilled mathematicians with great analytical abilities. It is also important to be kept updated on the latest developments in the field to determine how they could affect the firm's financial records.
Here is a quick comparison to see the difference between paying for an in-house and outsourced financial analyst.
Financial analyst
Monthly rate of Filipino staff
Monthly rate of in-house staff Entry-level
$593
$3,617 Average
$733
$5,148 Experienced
$1,134
$7,328(Sources: Talent.com, Indeed.com)
Risk analystRisk analysts are back office employees who supervise investments and identify potential risks in a company's investment portfolio.
Based on their review of these investments, they support the company by providing suggestions to corporations to assist in reducing future risks. Risk analysts must be skilled in analytical, strategic, and interpersonal abilities.
Here is a quick comparison to see the difference between paying for an in-house and outsourced risk analyst.
Risk analyst
Monthly rate of Filipino staff
Monthly rate of in-house staff Entry-level
$479
$3,510 Average
$631
$5,510 Experienced
$1,180
$8,650(Sources: Talent.com, Indeed.com)
Why is the back office important?Back office services are simply the unseen but critical processes that make a business run.
The importance of back office services to any business cannot be overstated. Without these services in place, an organization will face financial consequences — whether it's the inability to pay bills on time or having to pay employees late because payroll hasn't been processed.
The back office is often overlooked when businesses focus on marketing and sales. However, the success of your organization depends on how well the back office runs.
Here are some reasons why it's important:
Revenue. The more efficiently you can run your business, the more money you'll make. If operations are slow, it will take longer to receive payments from customers and vendors — which could impact cash flow. Staff productivity. Employees who don't have to perform tedious tasks like data entry can spend more time on other projects that are important for growing your business or completing daily tasks. Efficiency. By having a back office support team, your core team doesn't have to waste time manually inputting data into multiple programs or making phone calls just so that you can get things done quickly and accurately. Instead, all these kinds of tasks are done, handled, and maintained by a dedicated team! Customer service. A well-run back office means employees can focus on providing quality customer service, which will help maintain strong relationships with clients and create referrals for future business opportunities.Back office support can be provided by third-party companies or outsourced entirely to save time and money by eliminating internal redundancies.
For instance, many online businesses hire virtual assistants (VA) to provide administrative and customer service assistance without having them physically present in the office.
This allows businesses to maintain contact with their customers without paying for an expensive location in an expensive city with expensive overhead costs like rent and utilities.
Back office support definitionBack office support is responsible for organizing and improving the customer experience in the company. Accurate data, clear and interesting content, and well-designed websites all contribute to a better customer experience.
Back office support is the term used to refer to the services provided by an organization to its customers, suppliers, and other business partners. It encompasses all the activities that take place in a company's offices that are not directly related to its main products or services.
Back office support is the work that enables other people to do their jobs. It's important because without it, no one will be able to do their jobs very well.
The back office is also called “administrative support” or “administrative services,” and it includes jobs like human resources, payroll, data entry, and accounting, among others.
Back office support jobs are frequently concealed behind the scenes. However, they should never be underestimated.
These roles help expand company demands and minimize friction from the customer experience for roles dealing with data input, content moderation, office services, and financial services.
A good back office support program can help you prevent unfavorable encounters at every point of interaction. Employees in back office roles are equally as important to excellent CX as those in front office positions, from multichannel services to order fulfillment.
Further, back office support can be broken down into two categories: Support for sales staff and support for other departments.
Support for sales staffThis includes administrative tasks such as keeping accurate records of sales and customer information, ordering supplies and equipment, managing budgets, and paying bills.
It also includes providing technical support for sales staff, such as answering queries about products or services and helping them resolve any problems that may arise during a sale.
Support for other departmentsThe back office provides all the non-customer-facing capacities that keep the business running smoothly. This includes financial operations, accounting, human resources, IT, and inventory management.
Basically, the back office is where the work is done. It's where the staff are and where the support is provided.
In most businesses, the back office is where you'll find most of the employees. It's where your business happens.
Key benefits of outsourcing back office With the advent of the internet age, companies can now take advantage of what we call Business Process Outsourcing (BPO). This business approach can lessen the operational costs of running back offices while maximizing its full benefits.
This also translates to more time for you and your core office team to focus on income-generating functions.
Outsourcing back office roles guarantees that you are working with skilled professionals minus the hassle and cost of recruitment, as well as other operational and employee benefit expenses.
There are several advantages to why businesses should outsource their back office functions:
Cost savingsOutsourcing your back office operations will help you reduce operational costs without impacting the quality of your services. You can also cut down on employee expenses such as office space and the cost of equipment.
Back office outsourcing can help you save money by reducing the need for expensive in-house personnel to perform these tasks. In addition, it gives you access to employees who specialize in these areas and have the expertise needed to handle them properly.
Time savingsReducing costs means saving time too! You'll spend less time on administrative tasks like data entry, filing taxes, and finding new vendors to do business with because all this will be handled by your outsourced provider.
Improved productivityBack office outsourcing will allow you to focus on core business activities while leaving other roles to experts who have years of experience in handling such tasks.
This will help increase productivity levels at your company since they can now focus on their core responsibilities.
Focus on revenue-generating tasksBack office outsourcing frees up entrepreneurs to spend more time working on revenue-generating activities such as sales and marketing, which will help them grow their businesses faster than ever before!
Higher quality servicesOutsourcing companies have a lot of experience in providing back office services. They also have a large network of resources to draw from.
Your BPO provider can provide you with high-quality services at a lower cost than what it would be if you were to set up your own back office operations from scratch.
Where to find a back office outsourcing partner?Thanks to the growing BPO industry, finding a back office outsourcing partner is easier these days. There are thousands of companies that have entered the business process outsourcing industry to accommodate clients who need specific skill sets in their business.
The good thing is they can be found in any country across the world — whether nearshore or offshore.
The Philippines is among the fastest-emerging outsourcing destinations in the world ever since its emergence in the 1980s. Their expertise in back office services, as well as numerous other roles, attracts global firms to their shores.
The country's wide pool of BPO firms makes sure that their representatives are competent enough to handle the client's needs.
Outsource Accelerator lists over 3,800+ business process outsourcing companies in the Philippines specializing in back office administration.
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