Top 5 Reasons for Offshoring Staff

Top 5 Reasons for Offshoring Staff

Offshoring, as a global practice of relocating part of a business elsewhere, has its sound grounds and has arisen for purely economic reasons. While it may sound a bit cumbersome and initially not that cost effective to offshore a production line, especially if such one already exists at the home country, offshoring services such as software industries, IT and information communications, web design and other internet based activities is a wise and preferred choice.

Offshoring is a highly advantageous move. The logic of this includes a number of economic and administrative reasons which are hard to ignore. Offshoring has many attractions to offer, like reducing costs, improving corporate profitability or the opportunity to acquire skills or equipment not found in your company’s country of origin.
We’d like to examine some of the key advantages of offshoring a business in more detail.

1. Cost Savings

The economic logic for opting for offshoring is to save money by way of capitalizing on existing comparative expense advantages, especially labor costs, sometimes called labor arbitrage. Relocating one’s manufacture or service to a country with lower wages, lower cost of labor insurance and benefits is a hands down money saver. Especially to a place where there is a large unemployed but well-trained population, which means that finding the specialists you need is easier and costs less. The benefits run in both directions since jobs are created at the offshoring destination (usually a much lower labor cost location) while costs are reduced in the higher-cost labor country.

2. Employing Well-trained Staff, Specialized Skills and Equipment

There are many occasions when the skills needed for a certain job are not readily available at convenient remuneration in a particular country, so a company needs to relocate its service or business to a place where such staff is available. There are other situations, when certain specialized equipment might only be available in another country for half or third the price at home. This means no time or money spent on acquiring specialized equipment, nor on training staff. Especially if the chosen destination has a rich pool of talented and well-educated young people who may remain unemployed otherwise. The current demands on skilled labor in the developed countries makes offshoring a perfect complement to the already existing staff.

3. Tax & Tariffs and Greater Availability

A further advantage is a location where taxes are lower than at home, better still, are flat rate, like the 10% flat rate in Bulgaria, for instance. This makes offshoring to such destinations markedly beneficial, especially if coupled with a low tariffs and charges regime introduced by the country’s government with the specific aim to attract foreign investment. This definitely allows companies to generate greater profit. Availability also rates high amongst the grounds for offshoring, since working in a different time zone with a workforce ready for 24×7 operation,  greatly enhances the business opportunities of the company and allows for diversified service of clients at all times and meeting their ever-growing demands. This results in better quality service and a higher level of customer satisfaction giving the business a competitive edge.

4. Control at Reduced Risk

Choosing offshoring over outsourcing is a key element allowing the company to maintain control over the business activity. This comes from the fact that the business is performed within the overall organization of the mother firm without relinquishing it to a third party. This is a choice made when the company has certain sensitive tasks to perform and outsourcing may hinder the performance. In such cases, organizations choose to offshore rather than outsource since they maintain full control and personal responsibility. Additionally, having a number of in-house teams located in different countries reduces the risk and provides better marketing opportunities and customer service in the business manner specific for that company.

5. Business Growth, Profitability and Flexibility

The practice of offshoring greatly reduces all kinds of costs relating to conducting the business, especially labor costs which happen to be the largest expense item. Thus, some quite substantial funds are freed. This capital is now available for reinvestment and expansion of the business activities and services. In this way, one is given the freedom to work on their business rather that in it. Additionally, this leads to stronger customer satisfaction, which brings more customers and increases profitability. All this is done in a very flexible manner, since offshoring makes the company’s organization more adaptable and versatile thanks to the input of staff hailing from other economic and cultural environments.
On the whole offshoring is an unsurpassed way to achieve growth, profit and gain greater respect on the market and among customers whose demands and needs are constantly changing.