Outsourcing to Asia: Top 5 countries, benefits, drawbacks

by Andy Nguyen
Outsourcing to Asia

Asia is a giant in the global outsourcing market. The region includes some of the top outsourcing countries that can provide high-quality services at a fraction of the cost. 

It’s probably why foreign businesses like Nike, Amazon, and Google routinely pick Asian outsourcing over other, closer regions such as Latin America and Eastern Europe. 

In this article, we’ll explore outsourcing services to five such countries and give you three reasons for choosing each Asian country we list. We’ll also briefly discuss three potential drawbacks of outsourcing and how you can overcome them. 

Let’s dive in. 

Table of Contents

The top 5 countries for outsourcing to Asia

When outsourcing to Asia, you must consider the entire Asia Pacific region or the APAC region. 

This list includes Asia Pacific countries such as: 

  • China. 
  • Macau.
  • Hong Kong.
  • Taiwan. 
  • India. 
  • Indonesia. 
  • Japan.
  • Malaysia. 
  • Nepal. 
  • Singapore. 
  • South Korea.
  • Sri Lanka.
  • Thailand.
  • The Philippines.
  • Vietnam, and many more. 

Here, we will explore just five of these outsourcing countries in detail. 

1. China (East Asia)

A powerhouse in the international outsourcing market, China’s massive population offers companies a large labor force for their operations. 

The Chinese outsourcing industry can be categorized into three sub-sectors: 

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3 reasons to outsource to China

Here are some reasons why outsourcing to China can benefit your company. 

A) Fast-growing economy

The country claims to have the world’s largest middle-income group (between 100 million and 400 million), leading to multiple foreign investors entering the Chinese outsourcing market. 

This has led to China having the highest PPP (Purchasing Power Parity) globally at almost 25 trillion dollars, while the US follows as a close second at nearly 21 trillion dollars. 

China also has the second-highest GDP globally, 14 trillion dollars, just below the United States. The country produces about 90% of the world’s exports, and these contribute to almost two-thirds of its GDP, making China the world’s primary supplier of goods. 

B) Innovation capabilities

According to AT Kearney, China ranks at a strong #7 place globally in digital resonance. 

What is digital resonance? 

It’s how companies adapt to digital transformation, particularly in cybersecurity and automation. Companies these days rely more on outsourcing and automation, which could leave them vulnerable to cyberattacks. 

In this case, China has a high digital resonance score which means IT and software outsourcing to this Asian country is a safe bet. 

C) Helpful governmental policies

Traditionally, the Chinese government has kept a tight rein on local businesses, but officials slowly realized the economic boost outsourcing could provide. 

So restrictions on foreign ownership, especially in the financial sector, are slowly being removed so China can become a major player in the global economy. 

The government has also implemented favorable tax policies and subsidies to foster growth and create new outsourcing jobs. 

2. India (South Asia)

Outsourcing to India has been a common practice, especially in the IT industry, since the 1990s. It started with global airlines outsourcing back office services, and IT companies soon followed. 

During this time, the government started focusing its efforts on economic reform to encourage liberalization and privatization. 

Although it started with customer service and call centers, today, the Indian outsourcing market covers a wide range of services such as: 

  • IT services. 
  • Customer support. 
  • Human Resources (HR). 
  • Digital marketing. 
  • Accounting and payroll. 

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3 reasons to outsource to India

Here we explore three key reasons how outsourcing to India can help your business. 

A) Low labor cost

The cost of hiring a professional in India is much cheaper compared to North American or European countries. 

For instance, the cost of hiring software developers in Poland is 1,610 USD per month. In India, the cost for hiring a developer with a similar skill set and experience portfolio is around 401 USD per month. 

Compared with other Asian countries in this list, India has one of the lowest hourly rates (5.25 USD/hour), with China at 8.48 USD/hour, Singapore at 8.80 USD/hour, and Vietnam at 11.05 USD/hour. 

B) High English proficiency

While India is not primarily an English-speaking nation, English is one of its many official languages. 

According to the EF EPI (English Proficiency Index), the country ranks sixth in Asia for English proficiency. It has overall moderate proficiency compared to the world. 

The only Asian countries above it are, in decreasing order, Singapore, the Philippines, Malaysia, Hong Kong, and South Korea. 

C) Large talent pool

India has a staggering population of 1.4 billion people, out of which about half are of prime working age. 

Additionally, around 6.5 million students with undergraduate degrees join the workforce every year. 

This gives you a large, qualified workforce to choose from when outsourcing operations to India. 

3. Thailand (South East Asia)

Thailand has long been a manufacturing hub of the region. 

The country’s GDP in 2020 was 501.79 billion USD and represented 0.44% of the world economy. Since this was during the pandemic, it’s no doubt that Thailand has a strong healthcare sector along with its commercial and industrial ones. 

The country is well-known for its thriving contact center subsector, which is expected to see a 4.7% CAGR (Compound Annual Growth Rate) from 2017 to 2024. 

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3 reasons to outsource to Thailand

Here are some ways outsourcing to Thailand can help grow your business. 

A) Growing technological infrastructure

Under Thailand 4.0, the country plans to turn into a new value-based economy by adopting green and smart technologies. 

This will allow budding manufacturing companies to have low-cost options and thrive in the new digital era. 

Some of the technologies the Thai government wishes to invest in are: 

  • Robotic Process Automation (RPA): Improve the efficiency and accuracy of repetitive, monotonous work and minimize costs. 
  • Blockchain: Make it easy for users to share and receive data securely. 
  • Internet of Things (IoT): Using wireless technology or 5G to manage attentive supply chains in electronics, automobiles, and healthcare sectors. 

Read more about the future of outsourcing and its relation to automation here. 

B) Expanding economic freedom

Thanks to a 40-year plan, Thailand became an upper-middle-income country in 2011 from its previous status as a low-income country. This plan focuses on economic development, creating a positive investment climate, and introducing legislative reform. 

According to the 2020 Index for Economic Freedom, Thailand’s score is 69.4, ranking #43 worldwide and #11 in the Asia Pacific region. 

This commitment to freedom and market openness has a singular aim to attract foreign investment. These investments are crucial for development, breaking the poverty chain, and boosting the country’s growth trajectory. 

C) Incentives for private investments

The Thai government envisions its future as an innovation-driven economy that will lead to an automation-driven economy. 

For this, they have allocated 45 million USD to create smart cities, robotics innovation, and modern logistics systems. 

Private investments in these industries are highly incentivized by: 

  • Soft loans for small and medium enterprises adopting robotics and automation technologies into production processes. 
  • A three-year 50% reduction in corporate income tax for imported machinery 
  • Eight-year tax exemptions for exported raw materials. 
  • A 13-year waived corporate income tax for any investments made in the Eastern Economic Corridor (EEC). 

4. The Philippines (Southeast Asia)

According to the Information Technology and Business Process Association of the Philippines (IBPAP), the IT and BPO industry is the second-largest source of revenue for the Philippine economy. 

The services commonly outsourced to the Philippines include: 

  • Contact centers. 
  • Back office services. 
  • Data transcription. 
  • Animation. 
  • Software development. 

The World Trade Organization (WTO) also observed that the BPO industry transformed the country’s economy and is a major source of its overall rapid development. 

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3 reasons to outsource to the Philippines

Let’s look at why you should outsource your business process services to the Philippines.

A) Excellent English language skills

Other than Filipino, English is the other official language of the country. So Filipinos can speak English fluently at work and throughout their day-to-day life. 

Due to the high English proficiency, the Philippines enjoys the #2 rank in Asia according to the EF EPI. 

This is a driving factor behind the Philippines enjoying the title of the BPO capital of the world. 

It outperforms other common outsourcing destinations such as India (#6) and China (#7) in English language proficiency. As a result, companies from Western Europe and North America often outsource their customer support to the Philippines. 

Whether that’s voice support through call centers, customer service through omnichannel contact centers, or any other form of customer connection, the Philippines is the top choice for many for cost savings and high customer satisfaction. 

B) High literacy rate

The Philippines enjoys a high literacy rate of 98.3%, and many Filipinos go on to get university degrees. 

Most of these people who work in outsourcing companies have at least an undergraduate degree in subjects such as: 

  • Business administration. 
  • Finance. 
  • Education. 
  • Mathematics. 
  • Engineering.
  • Computer science. 

This highly varied talent pool allows you to easily search for qualified talent for any BPO and IT outsourcing requirement. 

C) Strong data protection laws

The Philippines has strict data privacy rules and regulations to prevent cyberattacks. This commitment to cybersecurity makes it one of the more secure countries in the world. 

The Philippines is one of only three ASEAN countries with data protection laws. The Philippine Data Privacy Act of 2012 allows offshore companies to practice outsourcing safely. 

Learn more about the difference between offshoring and outsourcing here. 

5. Vietnam (Southeast Asia)

The Vietnam government has been looking forward to making the country a choice outsourcing destination through strategic economic policies and market reform. 

The country’s ICT (information and communications technology) sector has been growing at nearly 9.8% per year (pre-pandemic) and contributing about 14% to Vietnam’s overall GDP. 

Ho Chi Minh City has also been voted as a Top Outsourcing City by Tholons for eight consecutive years while PWC forecasts it will be the BPO industry giant. 

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3 reasons to outsource to Vietnam

Below are a few ways in which outsourcing to Vietnam can improve your company’s bottom line. 

A) Emerging middle class

Vietnam’s population will reach 120 million by 2050 from its current 97 million. The median age (or the middlemost age) is 32.5 years and includes about 70% of the total population. 

An emerging middle class, primarily made up of this generation, is expected to double to 26% by 2026. As a result, Vietnam has great market potential to become the next outsourcing hub and a magnet for all types of foreign investment. 

B) Highly educated and skilled population

Vietnam’s literacy rate is an impressive 95.4%. Additionally, the labor participation rate in the country is 74.4%, one of the highest in the world. 

The government has also improved employees’ digital skills and technical knowledge to compete in the IT services sector. They have done this by opening more than 1900 vocational training centers and investing over 150 million USD in EdTech and e-learning. 

C) Fast and stable economic growth

Vietnam’s GDP growth in 2019 (before the COVID pandemic) was 7.02%. Since then, it has shown remarkable strength and resilience as it grew by 2.91% in 2020

No wonder Vietnam is considered one of the fastest-growing economies in Southeast Asia, as supported by its: 

  • Export-oriented manufacturing and processing industry. 
  • Robust domestic demand. 
  • Rising foreign direct investment (FDI) flow. 
  • High FinTech investments. 

However, with all these outsourcing benefits, there are bound to be some drawbacks which we’ll explore in the following section. 

3 significant drawbacks of outsourcing to Asia

Outsourcing comes with its own potential challenges if you’re not careful. Here are just a few of them.

1. Different time zones

Most Western countries operate in a significantly different time zone from Asian countries. 

For instance, the time difference between the United States and India is about 9-12 hours, while it’s 7 hours between the UK and Cebu City in the Philippines. 

Such different time zones can create problems regarding communication and collaboration. This is because your outsourced team may practice asynchronous work (working at different times from you).  

If any issues need to be resolved, chances are you’ll have to do this completely via email. Video conferencing might be difficult due to the difference in time zones, working hours, and even national holidays of the outsourcing destination. 

To make this easier, you should specify the communication and project updates parameters when drafting your outsourcing agreement with your chosen company. 

2. Quality issues

While there are many benefits to outsourcing, the investment is only worth it if you receive the quality product you expect. However, this can be difficult to ascertain as the team works separately from you. 

By the time they submit the finished product, you may realize it doesn’t meet your expectations. 

This can happen for a few reasons. 

You may have neglected to mention the service levels in your outsourcing contracts, so your provider might be unaware of your expectations. 

Additionally, the outsourcing company may not necessarily have the required expertise or resources to complete the task at hand. These hubs have lots of service providers to choose from, but a lack of due diligence on your part could lead you to a subpar company. 

Ensure you avoid this situation by asking your chosen outsourcing company for their portfolio and clearly communicating your project requirements. 

3. Lack of transparency

Outsourcing can make it difficult to estimate delivery times, especially if you don’t have a way of visualizing project progress. 

To make this process as transparent as possible, you can use Time Doctor

Time Doctor is a time tracking and employee productivity management tool trusted by large companies such as Better Business Bureau (BBB) as well as small businesses like Thrive Market. 

With Time Doctor, you can: 

Read more about Time Doctor’s features here. 

Wrapping up 

There are many reasons to choose any of the South Asian and Southeast Asian outsourcing countries mentioned above. Each country has its own strengths and something unique to offer. 

Regardless of which outsourcing hub you choose, use Time Doctor to keep an eye on your projects and improve your outsourced team’s productivity. 
Sign up for Time Doctor’s 14-day free trial here!

View a free demo of Time Doctor

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