January 14, 2022

What is Offshoring? Why and How to Set Up an Offshore Branch

The first thing to address when breaking into the world of offshore recruitment agencies and services is to get a perfect understanding of what offshore means. That is why, in the next article of Talent2Win, we will explain you more about the definition of offshoring and the benefits it brings to your company. 

What is offshoring? 

Offshoring is the process of moving a part of your business abroad. This can be beneficial for a business as it can lower labor costs and provide easy access to new and talented people. It also provides the advantage of being the perfect opportunity to position yourself for potential expansions and even have more flexibility in terms of things such as customer service hours.  

It is possible to have foreign workers for entire departments. For example, having an Australian based customer service team will help you cover hours for a 24-hour hotline. It is also possible to hire just a single foreign employee who could just be better equipped for the job than available talent closer to your business location. If the job can be done remotely then why not open a worldwide search? 

Differences between outsourcing and offshoring 

Offshoring speaks about working with different aspects of your business from another shore/country. This contrasts with outsourcing, which refers to the notion of employing another company to handle a function, project, or activity of your business process in the same country. For example, if you make toys, you might outsource the packaging part of the production process to a company in another state, but the production of the parts is offshored to China or Mexico.  

Outsourcing is useful as it allows a company to hire another highly specialized company to do something that may require more expertise or even more manpower than is available in the headquarters of the company. Experts agree that, when done correctly, outsourcing and offshoring can both increase a company’s competitive advantage, allowing you to focus on your core competency and understand your business’s capabilities alongside promises of quality.  

You might also like: 8 Reasons for Choosing our Digital Recruitment Services 

Benefits of offshoring 

Benefits of offshoring

Offshoring has the potential to provide both short and long-term benefits. In the long-term, it can help company leaders to strategize for further growth and business development without the need to compromise in other areas. It also promises to provide more flexibility and more control alongside that. Let us go into a little more detail about these benefits: 

1. Saved Costs 

This is probably the most obvious benefit of offshoring. By offshoring to a country where labor is cheaper, you are automatically saving money on both services and production (provided that the shipping is not astronomically expensive).  

This benefit does not only include labor costs in the country you have offshored in but also the cost of office spaces in your business’s location of sales. You do not need to worry about where to put the accounting department if the accounting department is in a different continent, and the continent that the accounting department is in probably has much lower rent costs. 

2. Tax Benefits

This is another great way to save some money. If you carefully choose your offshoring site, then you will be able to take advantage of tax breaks if the government of your chosen offshore site is trying to stimulate the local economy by cutting taxes for business ventures. 

3. New MarketsandEasy in Scaling up  

By offshoring parts of your business, you are making it a lot easier for yourself to open to new markets. If you are offshoring production, then it is relatively easy to access new markets as you have already factored shipping costs into your existing bill.  

Furthermore, it is much easier to expand into the country that you are offshoring in and less of a financial burden to take on new foreign workers. The lower costs of new employees mean that you can scale up much faster than in the USA and with less risk involved. 

4. Expertise 

Offshoring allows you to access an entirely different scope of talent and build an extremely talented team by hiring foreign employees with lower labor costs. This may seem like a disadvantage (we have all heard the phrase ‘pay peanuts, get monkeys’), but the wage is proportional to the wage you would pay in the United States. It is simply the fact that countries where you might offshore have a weaker currency.  

What are the types of offshoring? 

Broadly speaking, there are two different types of offshoring (although this can easily be broken down further). If we start with the two broad definitions of offshoring, then we are left with the following:

1. Offshoring Production

Offshoring production means that the company manufactures its product overseas and then transports it to the point of sale. This works well as it means that companies can set up in a country with more bountiful supplies of their key resources, for example iron or lithium, available for a lower cost. 

2. Offshoring Services

Offshoring services refers to moving things related to what may happen within the office overseas, this includes marketing, customer service, accounting, and, most commonly, software development.  

How to Hire Foreign Talent 

One of the biggest challenges of offshoring is the process of hiring foreign employees. At the best of times and situations, hiring can be a long and difficult process. When it is cross-continent, it can seem like a hapless task. However, it does not need to be so different, especially after 2020 ushered in the year of virtual hiring and working.  

Take advantage of tools such as Indeed, Linkedin, and other job sites, and if you have it available to you, use artificial intelligence in your search, as this will help you to gain employees who are more relevant and appropriate to your business and culture.  

If you’re still unsure, consider taking on a talent acquisition company that has experience in this field, such as us, Talent2Win. If you’re ready to begin your offshoring journey, contact us for a consultation today.  

At Talent2Win, we strive to align your company’s business objectives with the best Talent Acquisition strategies available. If you want to learn more about the services we offer, do not hesitate to contact us. 

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