What you need to know before offshoring to Asia

by Andy Nguyen
Offshoring to Asia

Offshoring to Asia has been a crucial business strategy for many western organizations due to the region’s low operational costs and technological know-how. 

While India and China have long been the most preferred offshore destinations, companies are also considering Japan, Taiwan, and South Korea in recent times. 

In this article, we’ll highlight the major offshore industries in Asia and the top six Asian countries to offshore your business processes. We’ll also discover the five impressive benefits and three significant limitations of offshoring to Asia. 

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Let’s get started. 

Here are the three leading offshore industries Asia is renowned for: 

1. Manufacturing

China, South Korea, Taiwan, Singapore, and Malaysia account for more than a quarter of the world’s electronics manufacturing output. India has been leading offshore manufacturing of car components, consumer electronics, and pharmaceuticals. 

The bigger factories and workforce of Asian countries empower them to yield a higher output with quick turnaround times. 

Additionally, Asian governments support manufacturing industries by offering tax incentives, higher value subsidies, and access to superior technology.

For example, the Northeast Asian governments of South Korea and China allow foreign firms to conduct their business in local markets in return for their latest technology that can boost product development.

2. Information Technology (IT)

Singapore is the offshore IT industry partner to many multinational corporations, including Citibank, Credit Suisse First Boston, Hewlett-Packard, IBM, and Microsoft. 

The 2021 Statista report reveals that India is the largest innovation offshoring destination for IT and software development companies worldwide. This South Asian nation produces top-grade engineers who experiment with new scientific approaches and significantly contribute to the Global Innovation Networks (GINs).

3. Offshore wind and renewable energy

According to the Key World Energy Statistics 2020 report, Asia contributes 48.6% of the world’s total energy supply. Naturally, the continent dominates the renewable energy market for offshore wind power and onshore wind power. 

Due to drastic climatic changes, most foreign countries seek to harness offshore wind power (generated through offshore wind turbines) and hire wind energy professionals from Asian countries. 

In fact, Asia’s offshore wind industry is expected to grow further over the next decade, with Taiwan expecting 10.5 GW of new wind power installations, Japan 7.4 GW, and Vietnam 5.2 GW.

Now let’s explore the best offshore outsourcing destinations in Asia. 

Top 6 Asian countries for offshoring business operations

Here are the six best offshore locations in Asia:

1. India

The United Nations Department of Economic and Social Affairs reveals that India significantly contributes to the global talent pool, especially in IT and software development. 

This country in South Asia produces millions of engineers and doctoral graduates every year from world-renowned Indian universities, like:

  • India Institute of Science (IISc Bangalore).
  • Indian Institute of Technology (IIT Bombay).
  • Homi Bhabha National Institute (HBNI Bombay).

Besides, their labor cost is roughly six times less than western countries.

So you can easily hire an external service provider or build your team of qualified professionals through an Indian offshore outsourcing firm. 

Keen to find an innovation offshoring partner in India?

Read our comprehensive guide on outsourcing to India.  

Also, here’s everything you need to know about the average salary in India.

2. China

According to the 2021 Statista report, around eight million students graduated from top Chinese universities, way higher than the number of graduates in the United States.

The scale of innovation and technology is reflected in China’s floating wind and offshore wind projects. This country in East Asia is home to the world’s largest offshore wind farm. 

Being the world’s most populous nation, China boasts a vast workforce and is considered the global hub of factories and manufacturing industries. So Chinese contractors can level up production cheaply, leading to higher cost savings for your company. 

Keen to make this country in the Asia Pacific your offshore outsourcing partner?

Read our comprehensive guide on outsourcing to China.  

Also, check out the average salary in China.

3. Bangladesh

The Global Services Location Index (GSLI) 2021 by A. T Kearney ranks Bangladesh 33rd out of 60 nations in offshore development and outsourcing potential. 

In fact, Bangladesh’s impressive GSLI score is primarily influenced by the comparatively low cost of infrastructure, average annual wage, relative tax burden, and flexible exchange-rate movements.

So you can offshore any business process to this location in South Asia, benefit from their comparatively lower cost of manufacturing, and create a reliable supply chain. 

4. Thailand

Thailand has shown tremendous economic growth and social development in the past four decades, luring enough foreign investors to set up their branch offices. 

This nation in South East Asia has become a key player in the global market for offshoring IT services (information technology) and BPO (business process outsourcing)

This is because the Thai Government has enacted several favorable business policies for expats worldwide. 

For example, we have the U.S.-Thai Treaty of Amity and Economic Relations, last updated in 1966. The Treaty allows U.S. citizens and U.S. majority-owned businesses incorporated in the United States or Thailand to maintain a majority shareholding or wholly own a company in Thailand. 

Eager to make Thailand your offshore outsourcing partner?

Then explore our in-depth guide on outsourcing to Thailand.  

Also, discover the average salary in Thailand.

5. Singapore

According to the 2021 Statista survey, Singapore attained fourth place amongst all the competing nations in the Education First English Proficiency Index (EF EPI). It proves that managing offshore business and communicating exact work objectives won’t be a problem in Singapore. 

Further, the ease of setting up businesses is a prime motivator for choosing Singapore as your offshore location. It has one of the most liberal Asian governments, offering a highly flexible tax system that includes:

  • Low corporate and personal income tax rates.
  • Tax incentives.
  • Tax relief measures.
  • Absence of capital gains tax.
  • Lack of dividend tax.
  • The territorial one-tier tax system, and more. 

All these factors attract foreign organizations to set up their offshore facilities in Singapore.

Want to hire and build an offshore team in Singapore?

Here’s everything to know about the average salary in Singapore.

6. The Philippines

Offshoring companies like Accenture, JP Morgan Chase and Co., and Amazon operate within the Philippines.

These offshoring businesses thrive due to favorable government policies existing in this country in Southeast Asia. For example, the Philippine Economic Zone Authority (PEZA) manages special economic zones. Companies set up in these zones enjoy tax benefits and other investment incentives.

Many western companies prefer the Philippines for call centers and software development services. 

Although India and China are known for their technical competitiveness, the Philippines has the edge over both nations. It’s because their workforce possesses a western-like accent. It makes communication with US and European organizations smoother and creates a friendly business environment. 

Still wondering if the Philippines is the right offshore outsourcing destination for you?

Here are the top five reasons for outsourcing to the Philippines

Also, check out the average salary in the Philippines.

Besides these southern and east Asian countries, here are some other popular offshore development centers in Asia along with their popular industries:

  • Malaysia: Baby food transport services, organic food, etc. 
  • Indonesia: Manufacturing, IT, etc. 
  • Vietnam: IT, Software development, etc. 
  • Sri Lanka: IT, Business Process Management, etc. 

Most of these developing nations are also known for their offshore call center services, delivering quality assistance through their Business Process Outsourcing (BPO) companies. 

And that’s not all!

Next up, we’ll discuss the benefits of offshoring your business operations to these Asian countries.

5 amazing benefits of offshoring to Asia

Although there are ample offshore locations in Eastern Europe and Latin America, Asia offers the largest pool of tech talent than anywhere else in the world. 

Here are some benefits of conducting your operations through offshore outsourcing firms in Asia: 

1. Low cost of labor

Be it for software development or customer service, you can hire qualified team members at a reasonable price in Asia. Recruiting and retaining Asian employees in an offshore location costs way less than paying for an in-house team in North America or other European countries. 

And by reducing labor costs, your company can decrease operational costs and increase the profit margin. 

Even the manufacturing and infrastructure-related costs are pretty low in Asian countries compared to those in the United States, United Kingdom, and New Zealand. 

Besides substantial cost savings, you can be assured of receiving quality work from talented professionals in these offshore locations. 

2. Technologically competent workforce

IT support levels (Level 1-5) signify the standard of business operation and service efficiency across all IT organizations. And a team possessing the highest IT support level is adept at resolving the most complex and challenging issues. 

Most Indian IT offshore outsourcing companies function at the highest level of work expertise, i.e., Level 5, while most US IT departments operate at Level 2 or 3. 

Even China houses some of the world’s best semiconductor design engineers, proving highly beneficial for consumer electronics companies. 

According to the 2021 Statista report, 3.14 million Chinese enrolled in Master’s and Ph.D. programs. This further enhances the nation’s research and technological capabilities. 

These emerging countries in Asia play a vital role in the Global Innovation Networks to speed up technological advancements and R&D processes. 

So you can efficiently recruit developers and other working professionals from Asia to implement innovation offshoring and improve any business process. 

3. Knowledge diversity in cross-cultural teams

Many western call centers choose the Philippines as their offshore partner to integrate the Filipino values of hospitality and empathy in their customer service operations. 

It allows them to deliver superior customer service by quickly building rapport with customers and gauging their concerns. 

This way, mixed culture teams can lead to effective knowledge sharing and constant development. As a result, it can help you explore new markets, improve customer relations, and optimize existing business strategies. 

4. Entering new markets

Working alongside team members at the offshore location can help you identify the emerging markets and customer support trends relevant to your business. 

Companies like Hewlett Packard and Dell, primarily known for their laptops and desktops, have also forayed into the markets of digital cameras and smartphones. It was possible because of their experience with offshore consumer electronics suppliers in China. 

Hence, offshoring to any Asian country allows you to harness the knowledge your company didn’t possess before and use it to target new sources of revenue. 

5. High level of English proficiency

According to the 2021 Statista report, nearly 97% of Filipinos agreed that English was the most helpful language for working professionals.

Similarly, the 2021 Statista report based on Vietnam reveals that about 86% of the population learn English, making it the most popular foreign language in the country.

Clearly, most Asian nations are fluent in English and can comfortably handle business requirements from native English-speaking countries.  

Having said that, there are certain challenges of offshoring to Asia that you need to consider before taking the final call. 

3 key limitations of offshoring to Asia

Here are three drawbacks to keep in mind before you partner with any offshore outsourcing hub in Asia: 

1. Difference in time zones

Western companies situated in Eastern Europe, Latin America, or North America need to consider the significant time difference when offshoring work processes to a Japanese or any other Asian team. 

The time difference can cause practical problems like communication lags, project delays, inability to set up ad hoc virtual meetings, etc.  

In some ways, it may limit your team’s ability to function at their highest potential. Instead of working on your business goals, you may spend more time figuring out the logistics and who’s available. 

2. Cultural disparity

Although your offshore developers may follow similar work ethics as you do, one cannot overlook the social and cultural differences between the two parties. 

For example, companies from the United States, United Kingdom, and New Zealand need to be aware of the public holidays specific to any Asian offshore location. Inability to do so may affect their project workflow, and they may have to deal with manpower unavailability when they most need it. 

3. Tough tracking employee productivity

Analyzing your employee’s work efficiency can be tricky, especially when they are working in a different continent and time zone. 

After all, how will you know when they are taking a break, how many hours they put in each day, and how long they are taking to finish specific tasks? 

Fortunately, you can use the feature-rich time tracking tool Time Doctor

With this productivity management software, you can gain insights into your offshore team’s performance.

Here are some other ways in which you can benefit from the robust features of Time Doctor:

Wrapping up

Asia plays a vital role as the global offshore outsourcing hub.

Many North American and European countries prefer offshoring to Asia owing to their cheap labor market, qualified workforce, and innovative IT solutions.  

However, you need to consider your business model, long-term goals, and other expectations before plunging into the offshore outsourcing industry in Asia. 

You can refer to this article to understand the advantages and disadvantages of offshoring to Asia and take the best decision for your business.

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