How to Make Offshoring Work for Your Company
While taking staff cost crunch offshore has become a solution for many small and medium-size businesses (SMEs), horror stories of outsourcing gone wrong abound among chief executives and their companies, whether they are offshoring to India, the Philippines, or another low-cost country.
There are CEOs who visit their offshore team and get impressed with the skills, only to be taken aback by the lack of transparency in the outsourcing process. Some witness the whole service being purely transactional and built on a culture where people come and go (the perennial problem of poor retention). The boss may also find that the row of call centre representatives he is paying for is also taking calls from one or two other companies.
That likely will not work for you. As a client, you would want to know what Employee A is paid versus Employee B, if your team has the latest in IT equipment and redundant Internet connection, and if you could have the same control of the team in the Philippines as you do with your people onshore.
South Australian entrepreneur Tim Vorbach was on the same boat a few years ago. After terminating various client-provider relationships and doing his homework, he came to understand how offshoring can work effectively.
“I incorporated a company in the Philippines and started servicing the needs of my Australian businesses via my own staffing platform,” he said, calling the company EMAPTA and stationing it in Manila. He shuttled between Manila and Adelaide every two weeks for 10 months, and eventually moved his family to the Philippine capital and liquidated some businesses to focus more on his offshore staffing firm.
“I find that more Australian companies increasingly make the commercial choice of employing three to four staff at a lower rate in the Philippines compared to one in Australia. And offshore staffing does work for them,” Vorbach said.
“A software solutions firm obtains 77% savings from labour costs of a six to 10 person team, compared to spending $200,000 for setting up their own office in Manila. A boutique financial advisory firm is able to transfer 80% of financial planning paperwork to its offshore paraplanners, giving its Australian financial advisors more bandwidth to close sales and face customers.”
Vorbach, an offshoring pioneer in increasingly BPO-dependent Manila, offers expert tips on offshoring certain staff roles and functions, particularly if you are getting the services of an offshore staffing provider.
- Look at the value proposition. The devil is always in the details. Flesh out an offshore staffing plan and see how scalable and effective the delivery platform is. Investigate the visibility of all staff and related costs. Does the provider add a margin to staff salary? Are the providers’ fees sustainable for your company? “If you have a high-volume, low margin business like I do, an offshore staffing provider with unreasonably high margin and hidden costs likely isn’t the right fit for you,” Vorbach said.
- Demand transparency. Even with a remote setup, you should never lose full control and direction of your offshore staff, along with security over your proprietal information. No hidden agendas and surprises – the offshore provider should involve you in every decision made, from talent acquisition to staff training and evaluation. It should put a premium on your employees’ wellness and satisfaction, taking good care of them and not fostering sweatshop-like operations.
- Get all the support you need. You won’t be able to focus on your core business (typically one of the main motivations for offshoring) if you are preoccupied with every little HR administration and IT connectivity problem. Choose a provider that offers operation management oversight once your team goes live. This way, you can concentrate on things that matter, such as your bottomline.
- Hire the right people – and treat them as your own. Choose from a large pool of English-speaking, university-educated, aptly skilled professionals in a scalable offshore staffing platform. Make conscious steps toward cultural alignment, which will make your offshore staff effortlessly adopt your mission, strategy and goals (MSGs). Your provider should also be instrumental in high talent retention, such as being located in a business-friendly location with reliable IT/telco infrastructure and public transport system.
An effective offshore team can make a huge difference for your business, especially if you are struggling with rising costs back home, including increasing overheads from superannuation and payroll tax. You can rechannel your savings back to your customers, optimising customer relationships and expanding your front end.
But the offshoring model is only as good as how you execute it – if you are equipped with the right plan, people, and partner for success.