Outsourcing has become a key business strategy for many businesses, due to the opportunity to not only reduce cost, but to leverage capability. In addition, many companies are taking advantage of this opportunity to transform business processes, and enhance services.
To create success in outsourcing, it is critical to understand what offshore model will work best for you. This will depend on the type of support required, and your business objectives.
There are four main offshoring models that businesses typically consider:
Each model has its own advantages and disadvantages. Take a look at each offshoring model and see which approach suits you best.
Offshore Model #1: Freelance
Freelance is a well-known offshore model on a job-by-job basis where workers most likely work from home. Freelancing can work well for some types of projects as it is flexible, and is easy in and out.
However, potential issues may occur over time as freelancers take multiple projects from other companies, and you may not be given top priority.
Some of the drawbacks and limitations of freelancers include:
- Internet issues – given most freelancers work from home, internet and power can impact on service delivery.
- Productivity – productivity can be reduced due to home distractions. This includes noise during phone or video calls.
- Quality control – many freelancers take multiple jobs to increase their income, which can result in reduced productivity and quality of work.
- Team collaboration – collaboration is more difficult in a distributed workforce.
Offshore Model #2: Functional
Functional is an outsourcing model where you offshore part of your operations to another firm. The offshore provider delivers the process for you, providing the deliverables/output on your behalf. Some examples of this include Payroll, financial statement preparation, or legal services.
Some of the limitations of this model includes the following:
- You don’t control the process and system that the offshore provider is using.
- You don’t control the team that’s working for you, and you rely upon them for workflow management and task prioritisation.
- And, you rely on someone else who is doing the tasks for you, and you don’t maintain the knowledge.
Offshore Model #3: Dedicated
Dedicated is an offshoring model where you build your own team that reports directly to you, but with an offshore operation providing infrastructure, overhead and support. It is an effective model for extending your onshore team, and getting your team up and running quickly.
Here are some of the advantages of using dedicated offshoring:
- You select team members, who report to you, and who are an extension of your onshore team, not a separate part.
- Cost savings of around 70% are achievable on comparable skill sets.
- You control the tasks, so knowledge and value creation is maintained internally.
- You avoid the lead time, expense and complexity of setting up your own offshore operation, and all of the required support functions.
- Unlike freelancers, you can actually build a team
Although dedicated offshoring is more expensive than a freelancer, the ability to build a team can improve productivity, and result in increased team engagement that justifies the cost.
Offshore Model #4: Own Office
Setting up your own team and office offshore might be an aspiration for some. This model often fits larger businesses who are looking to extend their team for various reasons – embarking on new project, enhancing the line of services or products, or the business demands may require special skills.
If you plan to build your own team and office offshore, you will need to handle the entire process which includes, but not limited to:
- Finding the perfect location
- Managing cost, legal and compliance requirements
- Hiring a recruiter to find candidates for you
- Purchasing software licenses and hardware requirements
- Managing employee benefits and taxes
Outsourcing can deliver benefits to your business. It can help you save long-term costs while maximising your reach and value onshore. However, when choosing an outsourcing model, don’t fall into the “low cost” trap alone. Be sure to partner with an outsourcing provider who can best meet your requirements and business objectives.