Offshoring work has been popular for quite some time now and has been a popular topic among entrepreneurs. But there’s no time better than today to do this. The global economy post-pandemic has seen a rise in work-from-home, and advances in technology that let remote workers communicate and share information securely and efficiently from anywhere in the world. Geographic location is no longer a hindrance to success for workers or a barrier to hiring for employers.
Managing my own business for more than 15 years has shown me firsthand the value of using offshore employees to lighten my administrative load and make me more productive. Here’s a list of examples, statistics and reasons showing why it’s advantageous for businesses to find at least one part of their operation to send offshore.
Cost savings
Cost reduction is one of the main reasons that businesses outsource. There are two main things to take into consideration when looking at how much money you can save through offshoring work: the cost of living in the countries your workers live in and their country’s currency exchange rate.
For example, let’s say you’re looking to offshore some software development work to India. The cost of living in India is on average about 70% lower than in the United States. The average salary of an Indian software developer is 2,273,765 rupees per year. At an exchange rate of 1 rupee to .012 U.S. dollars, that translates to just over $27,000 per year.
Compare this to an average salary of $123,600 for a U.S.-based software developer. An employer can pay a software developer in India a very attractive salary while at the same time keeping salary costs lower for the business.
Businesses can also save on operational costs. Maintaining office space for employees in the U.S. can be very costly. Expenses like business taxes, utilities and labor mean the larger the office with the greater number of employees means higher costs for the business owner.
If you’re considering having a remote foreign office with offshore talent, location is key. Locations like the Philippines have very low real estate costs and India has rents that are 86% lower than in the U.S. This is especially helpful when offshoring IT staff, who may need to be in the same office space for the purposes of collaboration on development projects.
In my own work as a digital content creator and consultant, I employ an offshore worker in Africa who is responsible for posting content on social media that I’ve written on my personal website. This is a task that, while not complicated, is certainly time-consuming. Having an offshore employee take care of this means that I can spend my time more productively producing new content rather than having to manage older content. And while she is an ocean away, communicating with her can be as simple as a Zoom call or Slack chat, and paying her is as simple as using PayPal.
She not only helps manage my web presence but also my social accounts. Multiple times a week she updates my social accounts with my content so I can get the word out about my work. This person not only saves me time but also money as I can pay her a wage that she is happy with, but that’s less costly than employing a domestic worker. While there were some initial costs in the time it took to familiarize her with how I wanted the work done, the benefits of an extra person with the right digital skills far outweigh the onboarding time.
Unit economics
By offshoring work, it’s possible to make the unit economics work for something that you couldn’t otherwise. For example, let’s say you sell a product that costs $500 per unit. Paying and incentivizing a U.S.-based sales force to move that product can be expensive. By shifting that sales force to another country with more manageable costs, you can achieve the same result with reduced salary, healthcare and operational costs.
You can also leverage time zone differences to get more productivity out of your workers. A salesforce based both in the U.S. as well as overseas can sell during both regions’ business hours, allowing you to get more hours of productivity in a wider area within a 24-hour day.
While managing remote time zones may require some additional hours and finessing of schedules, the results can be worth it. Over the years I’ve interviewed founders who create work schedules that overlap with the remote team’s. This allows them to schedule meetings that communicate project statuses and handoffs so the remote team can pick up where the home team left off or vice versa.
Building the muscle
While cost reductions are an appealing reason to offshore, the first time you offshore resources may create cost savings that are nominal at best. Offshoring isn’t as simple as replacing one worker in the U.S. with one overseas. Initially, there are costs incurred in determining which country you want to operate in, finding the right people, training them on your process and product and the legal and compliance costs associated with managing an international contract.
Getting offshoring right takes time, but it’s time well spent. The muscle memory built from working out all the kinks will result in each subsequent offshoring opportunity becoming easier, faster and more cost-efficient.
Now is the time
There has never been a better time than now to offshore work. There are numerous online resources available to find offshore workers such as Freelancer, Upwork, Guru, Virtualemployee and Fiverr. Software tools like Remote and Deel let business owners easily manage paying remote workers. Tools like TimeDoctor and Klok let you track their time for your projects.
In the business world now it’s becoming clear that offshoring and outsourcing are integral components of a continually evolving economic landscape. Technology has allowed for business owners to tap into a pool of diverse and well-skilled workers who can thrive with the right organization. While still in its earlier stages, offshoring has proven to be a practical solution for businesses to increase productivity while reducing operating costs. If managed properly, offshoring can lead to increased customer satisfaction, higher revenues and positive business growth.
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