And while you can use offshoring to increase business productivity and growth, you need to understand it clearly before you offshore your processes.
In this article, we’ll discuss ten successful offshoring examples and the unique benefits of the business practice. We’ll also share three no-nonsense tips to help you and your team adapt to offshoring easily.
This article includes:
(Click on a link to go to a particular section)
- 10 Successful Offshoring Examples
- What is Offshoring?
- When Should You Offshore?
- 3 Things to Do for a Smooth Offshore Transition
10 successful offshoring examples
Offshoring involves moving a firm’s business processes to a distant location, usually a developing country. (More about offshoring later in the article.)
Popular companies from different industries have used offshoring to scale up and increase profitability. Let’s look at a few of these giants and their offshoring journeys:
WhatsApp Messenger, popularly known as WhatsApp, is an American free messaging and VoIP (Voice-over-IP) service application — now owned by Facebook.
In its early days, the founders of WhatsApp had offshored its services to developers in Russia to create the application at a low cost. As the organization grew, some of its Russian developers moved to the USA.
Later, Facebook acquired the company for $16 billion as it grew successful.
Google is an American multinational tech company that provides internet services like a search engine, cloud computing, etc.
In 2020, Google acquired CloudSimple, a Ukrainian company that provides a secure, high-performance, and a dedicated environment to develop a VMware migration (moving a virtual machine from one server to another) solution.
Google has also outsourced tasks related to software development to remote employees across the world. According to a Bloomberg report, the total number of Google contractors outnumbered their in-house employees in 2018.
Google says outsourcing and offshoring help them manage workload and employ better candidates.
Amazon.com, Inc. is a multinational American tech company that focuses on e-commerce, digital streaming, and AI (Artificial Intelligence).
Amazon outsourced its call center services to South Africa, a country with several talented customer service outsourcing companies. It later set up a customer service outsourcing base in Cebu, the Philippines, in 2018.
Other than customer support, Amazon has also offshored R&D to a Ukrainian start-up specializing in developing home security systems. By offshoring its R&D, Amazon can access exceptional talents at a reasonable labor cost.
4. Wise (formerly Transferwise)
Wise is a London-based financial technology company that helps its customers transfer money online from different parts of the country.
The organization has offshored its development to talented professionals across the world.
Additionally, its remote development team is primarily located in Estonia and Ukraine.
Some developers who have been with the company since the early days have even joined the core team.
BigCommerce is a US-based e-commerce platform where business owners can set up their online stores and sell their products.
At a stage of their development, BigCommerce couldn’t expand due to the unavailability of IT professionals. So they outsourced their IT tasks to an offshore company based in Eastern Europe (Ukraine).
The company also offshore outsources tasks like data entry, accounting, R&D, etc., to talented candidates or companies in different countries.
6. Ford Motor Company
Ford Motor Company is an American automobile manufacturing company.
Due to the high demand for its vehicles and increasing production costs in its domestic market, Ford offshored its manufacturing to China. The company also has offshore manufacturing operations in Mexico.
Additionally, it has outsourced its back-office, software development, IT services, and customer support to India and other countries. It even has several manufacturing units in Thailand, Brazil, France, China, etc., where operations are cost-effective.
Samsung Electronics Co., Ltd. is a South Korean multinational company that makes electronic and smart appliances.
It has offshored its manufacturing to countries like the USA, a huge consumer of its products. It invested $500 million in its Austin semiconductor plant in Texas in 2005.
The organization also has a new plant in India solely to manufacture smartphones. Additionally, it has offshored its customer support for Australian Samsung mobile users to the Philippines.
8. TCS (Tata Consultancy Services)
TCS is an Indian multinational company that offers information technology and consulting services.
The company’s offshored operations created 276 thousand new jobs in 55 countries in 2013.
Moreover, TCS also recruits students directly from colleges in the USA, Canada, China, Uruguay, and Hungary. The IT company has also made its presence in China known by operating six global delivery centers in the country.
9. GE (General Electronics)
GE is an American multinational company that builds digital solutions for aviation, healthcare, power, and many other sectors.
The company has offshored its services to India and invested $120 million to build a Research and Development center in Bangalore for new technologies and solutions.
GE also has a technology center in Bangalore, which employs over 2000 engineers and scientists.
Microsoft is an American multinational company that develops, manufactures, sells, and supports computer software and electronics. It’s known across the world for offshoring and outsourcing its operations.
The company had signed a three-year agreement with Infosys (an Indian multinational IT company), outsourcing tasks like technical assistance, management of databases, and software applications.
In 2007, it signed a seven-year BPO (Business Process Outsourcing) agreement with Accenture (an Irish multinational consulting company), offshore outsourcing its finance and accounting tasks for $185 million.
Microsoft had gained a profit of $108 million by offshore outsourcing its services in 2015.
What is offshoring?
Offshoring is the relocation of business activities (like production, customer support, etc.) to a different country where the labor and other resources are cheap.
It’s a cost reduction technique where you usually move operations to countries where living costs are less. This gives companies a competitive advantage over their business competitors.
Another offshoring model is when the business owner hires a third-party offshore service provider to carry out a certain job. This business model is called offshore outsourcing.
Offshoring can be divided into two types depending on the services that are offshored:
1. Production offshoring
The offshoring of the manufacturing process of a company to another country is called production offshoring. In this offshoring, the finished products are imported back to the home country for selling.
For example, a company manufacturing iron-rich machinery may offshore its manufacturing to a country where iron is abundant and labour cost is cheap.
2. Services offshoring
The offshoring of services like customer support, accounting, finance, IT, marketing, etc., to a foreign country in a different time zone is called services offshoring. Services are usually offshored to save money or when the talent pool in the home country is weak.
For example, an e-commerce platform may offshore its customer support services to a country where agents are fluent in English, have strong communication skills, and are less expensive.
Key benefits of offshoring
Offshoring tasks have been growing in demand as companies look for ways to expand.
Let’s look at a few offshoring benefits that attract companies:
- Concentrate on core business: With tasks like accounting and finances out of your way, you can invest your time in a core business function like strategy and expansion.
- Cost saving: Business owners usually offshore services to a country with lower labor wages and cheaper real estate. You can also save on tax, electricity, and other office supplies, due to the lower cost of living.
- Skilled human resources: Your offshoring country may have more talented professionals than your home country.
Read more about offshoring’s benefits.
Major limitations of offshoring
Before offshoring, you should be aware of its challenges as it’ll help you choose a suitable country to offshore.
Some of its disadvantages are:
- Language and cultural barrier: The cultural differences between you and your offshore team can be difficult to overcome. Additionally, your offshoring worker may have a different native language, which can disrupt communication.
- Time zone differences: The time difference between your in-house team and offshoring company employees may make it hard for them to work together on projects.
- Distance: The distance between your home and offshore location can discourage you from visiting the external team. Travelling can also cost a lot if your offshore country is far.
Explore the disadvantages of offshoring in depth.
When should you offshore?
It’s important that you offshore services only after proper planning.
Watch out for these signs that indicate that it’s time to offshore your business operations:
1. Skill shortage
According to a survey by SHRM (Society for Human Resource Management), 75% of HR professionals say they face difficulty in recruiting due to the unavailability of talent. This means that you may not find suitable domestic workers.
In such a situation, you may have to consider offshoring or outsourcing to a foreign market where candidates have specialized skills suitable for your work in such a situation.
You can offshore to CPA (Certified Public Accountant) firms or similar core companies where employees may be more talented.
2. High operation cost
According to the USPIRG (United States Public Interest Research Group), Fortune 500 companies have saved $2.6 trillion by offshoring to countries that are tax-havens.
These countries offer tax incentive programs that lead to little to no tax liability to foreign companies.
Additionally, offshoring destinations have lenient offshoring rules and regulations. You can also benefit from the lower cost of resources like office infrastructure, equipment, electricity, etc., — due to the low cost of living.
This way, you can run your offshore operation at a minimum cost.
3. Requirement for better services
Offshoring can ensure your business operates 24/7.
For example, let’s say you offshored a part of your US customer support to the Philippines (in a different time zone). Your in-house customer care team can engage customers during the day while your offshore agents can answer their queries at night.
This way, you can provide 24/7 customer service — at a lower cost.
4. Reduce workload
You can offshore your business when your team’s workload increases.
By offshoring services during heavy workload, you can:
- Reduce stress on employees and improve their engagement levels.
- Reduce room for human error as employees focus on fewer things at a time.
- Get more work done at a low cost due to inexpensive labor.
This way, you can help your company become more efficient.
3 things to do for a smoother offshoring transition
Offshoring can be challenging to manage for you, your in-house team, and your offshore team.
However, there are a few ways to make the transition easy:
1. Start with a small team
Managing your offshore team can become difficult if they’re a large team — especially when you have no prior experience offshoring.
So it’s better that you start offshoring with a small team that is easier to guide. You can later expand your offshore team according to your business demands.
2. Train offshore workers
Your offshore team may be unfamiliar with your brand, customers, and operation style — which can reduce their productivity and affect the end result.
To prevent this, you can train your offshore team before they work. Familiarize them with their duties, discuss goals, and create a plan. This way, you can help them adapt to your company.
3. Use the right software
Suitable software can help you overcome offshoring challenges by streamlining communication, managing projects, storing data on the cloud, processing payroll automatically, etc.
Some of the tools that you can use are:
- Communication tools: Slack, Zoom.
- Project Management tool: Asana, Basecamp.
- Storage: Google Drive, Dropbox.
- Payroll Processing: Xero, Zoro Payroll.
- Customer Relationship Management: Salesforce CRM, ActiveCampaign.
Time Doctor is another such software that simplifies offshore team management.
It’s a powerful employee productivity and performance tracking software used by large corporations, like Ericsson, as well as by small businesses, like Thrive Market, to boost productivity.
With Time Doctor, you can:
- Track work hours manually and automatically.
- Prevent your offshore team from getting distracted with ‘Idle Time Pop Ups’.
- Add productivity ratings for various websites and applications.
- Generate detailed productivity reports to analyze your offshore team’s productivity.
- Use the Chrome extension to integrate with many powerful tools like Asana and Todoist.
- Access a user-friendly mobile application for Android devices to track time on the go.
For any company, offshoring is a major step that needs careful consideration and planning.
You need to think ahead about when and where to offshore business operations and how to carry out the process economically.
And for this, you can learn from companies that have used the offshoring model to grow their businesses. You can also refer to the other tips in this article for successful offshoring.
Andy is a technology & marketing leader who has delivered award-winning and world-first experiences.