Until fairly recently, if you’d asked a CIO or HR Director their perception of offshoring, there were three standard responses: 1. Cutting costs. 2. India-based workers. 3. Low-skilled jobs.
These views were shaped over the past decade due in large part to the surge in offshore customer support teams for telecommunications and IT providers, and the uptake of Business Processing Outsourcing (BPO) strategies.
However, the ‘off-the-shelf and out-of-sight’ offshoring cliché of yesterday has given way to the emergence of a highly sophisticated, talent-driven industry serving up niche skills, and powering global brands and small businesses alike.
As customer experience and employee experience have become the new battleground for pretty much every industry, companies are increasingly looking for ways to scale without adding risk or blowing budgets. Add to this the rising skills shortage and impact of COVID-19, the pressure to meet scarce capability demands and find efficiencies has many executives exploring different growth strategies.
During this shift, Manila – capital city of the Philippines; population of 25 million – has overtaken India as the preferred location for Australian and US companies sourcing skilled offshore talent. Manila’s highly educated workforce, proficiency in English/accent neutrality and sustained government investment put the city on track to become the leading offshoring and BPO location in the world.
Finding the right offshoring approach can offer business leaders a temporary or permanent solution to grow their operations at speed and unlock greater productivity from their employees. Where outsourcing moves work to a third-party, flexible offshoring solutions allow companies to augment current teams or specific processes with additional capability as required. These employees are hand-picked and managed in the same way as ‘onshore’ employees, but don’t carry the equivalent recruitment investment and administrative burden.
It’s a compelling strategy, particularly when many industries are grappling with a skills shortage.
Here are the top 5 advantages of offshoring:
1. Access to world-class, niche talent
Software developers, IT support, finance and engineering are just a handful of in-demand roles as skills shortages increase across Australia and the US. Offshoring not only provides access to a world-class talent pool of university-educated candidates in technical disciplines, but increasingly across creative fields including marketing, web development and social media.
While ‘traditional’ offshoring skills like IT support, administration, financial management and accounting remain in high demand, Manila’s growth as a hub for professional skills illustrates the changing face of offshoring.
2. Lower cost, higher profit margins
Employee costs in the Philippines are generally 30% of an equivalent role in Australia or 20% of an equivalent role in the US, enabling businesses to increase headcount or add new capability without the same financial impact. Recruitment costs and turnover for offshore roles are also significantly lower.
How is this achieved? Being a developing country, the Philippines has one of the lowest costs of living among its regional neighbours. The minimum wage is approximately AUD$320 per month, which is deemed adequate for a family of five to meet their basic needs.
By contrast, an employee working in an outsourcing/offshoring role earns, on average, more than double the minimum wage – AUD$770 – AUD$930 per month. Salaries are relative to living costs and reflect the war for talent sweeping Australia and the US. Today, the primary reason western businesses invest in offshoring isn’t to be ‘cheap’ – it’s to access necessary skills at an affordable cost.
3. Scale at speed
Offshoring is responsive and flexible, enabling businesses to effectively resource during peaks and scale back during quieter times. Depending on the role, leading offshoring providers can source, screen, recruit and onboard a new team member within 2-4 weeks.
4. Forget the administrative burden and HR headaches
The cost of hiring a new employee extends well beyond topline salary – desk space, computer equipment, payroll and benefits add up. And that’s just for one new hire; what about the time and financial commitment incurred when recruiting and sourcing space for a new team? Offshoring completely sidesteps these expenses. While a new offshore team member is onboarded and managed in the same way as every other employee in the company, their cost is fixed and invoiced monthly – just like a supplier.
5. Complimentary time zones for a 24/7 world
What was once seen as a disadvantage, smart companies have parlayed into rocket fuel: accelerating their development cycle or customer experience journey with 24-hour resourcing. Tasks that may have taken several days to complete by employees in a single time zone can now be completed in one day with round-the-clock resource. Similarly, when ‘onshore’ support teams log off, their offshore colleagues pick up the baton – providing a seamless experience and always-on help for customers.
Due to the similar time zones, Manila-based employees find it easy to operate on the same workday hours as Australian or US-based teams, or to operate on shifts outside standard business hours.
The bottom line?
Regardless of size or industry, businesses are constantly balancing the need to scale up quickly without eroding their cost base. Most often, it’s a case of compromise and timing: investment in additional capacity and/or capability vs. other business priorities? Offshoring flips that equation on its head, providing an alternative path to growth.