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Why do some companies offshore some of their business operations?
2021-10-28 /

Companies Use Offshoring in Order to do What?

A lot of companies worldwide are resorting to offshoring business operations. Still, this question lingers: Companies use offshoring in order to do what? Find out the real reasons throughout this article.

Offshoring is a popular business model wherein a company relocates one or more business processes to another country. These business processes are typically manufacturing and supporting operations (accounting and customer service). At present, companies are offshoring even essential business processes such as product development and software development. 

Countries such as the Philippines, India, and Ukraine are some of the top offshoring destinations for American companies. In the Philippines alone, you’ll find a lot of offshore captive centers for large companies. These offshore centers include Convergys, JPMorgan Chase Bank, IBM, Macquarie Group, Telstra, and Accenture. 

The companies, as mentioned earlier, have their headquarters in the United States, Australia, and Ireland. Still, these giant companies sought offshore services from the Philippines. Why is that? These companies use offshoring in order to do what?

Companies Use Offshoring in Order to do What?

If we go down memory lane, the primary reason for offshoring and outsourcing business processes is to reduce labor costs. But as it turned out, companies are receiving poor product and service quality from offshore partners. Though the beginning was rough, companies are yet to give up on offshoring. There were lots of trial and error, but the end was worthwhile.

Companies are seeing offshoring in a new light. What once was a single reason for relocating business processes took root and grew branches. Small, medium, and large companies are now offshoring for dozens of reasons. Here are some of them:

1. To Reduce Cost

The reduction of business expenses is the most compelling reason why companies use offshoring. The cost of producing goods and services is relatively lower in an offshore location compared to the home country. But the reduced price is not only on the wage pattern in labor. The cost of infrastructure is relatively lower as well.

Imagine this: One offshore development team works as efficiently as an in-house team. Supposedly, it would be best to have another team to support your current in-house developers. Instead of hiring new in-house developers, you can save costs by hiring an offshore team. The cost reduction could go up if you know how to choose the right offshore company.

Amazon.com implemented this strategy years back. The American tech company relocated its customer service to the Philippines in 2018. Since the country has a vast talent pool, they set up their outsourcing base in Cebu

Google, another big player in the industry, resorted to offshoring to reduce labor costs. Google is not investing in one country alone, but it has offshore software development teams worldwide. However, cost reduction was not their primary reason for outsourcing. It is a welcoming result since offshore hiring significantly impacts their ROI.

2. To Access Vast Talent Pool

Companies use offshoring in order to do what they can’t do in their home country. To access a vast talent pool of developers.

Over the years, the U.S. has been battling the lack of software development talent. There is a significant scarcity of high-level experience and skills among developers. If a company does find a suitable candidate, expect to pay a high hiring cost. This problem led a lot of entrepreneurs to the road of offshore outsourcing. 

The exact same road led Full Scale founders to build an offshore software development center in Cebu, Philippines. Full Scale Co-founders Matt DeCoursey and Matt Watson are serial entrepreneurs based in Kansas. Before building this fast-growing company, the Matts encountered a talent shortage in their individual businesses.

Later on, the duo discovered there were tons of talented software developers in the Philippines. From there, they opt to help startups and scale-up American companies to access similar talented developers through Full Scale.

Just like Full Scale, BigCommerce also benefits from outsourcing development talent. The U.S.-based e-commerce can’t expand due to the lack of IT professionals. Instead of embracing their fate, they sought to outsource their operations. Now, the company also outsources other business operations such as data entry, accounting, and R&D.

3. To Focus on Relevant Challenges in Business

One of the main problems of small to medium-scale companies is the limited resources for their ancillary functions. In-house developers tend to do both core business activities and additional tasks for the company. This exhausts employees and, at the same time, affects efficiency and productivity.

Furthermore, multitasking can significantly affect work quality. You’ll find a lot of mistakes and mishaps due to work overlaps.

That is the reason why companies offshore secondary business operations. Offshore companies take care of the ancillary tasks as part of offshore operations. With that, the company can focus on core business movements such as planning, product development, and implementing business strategies.

A perfect example of this is the intelligent business approach of WhatsApp. Before the company took over the market, it focused on developing its application. WhatsApp incorporates offshore talent to work on their backstage processes.

These processes include design solutions and core application development. The in-house team centers its efforts on client-related tasks and customer support. 

The company’s proper management and task designation resulted in the product’s massive hit in App Store and Google Play. In fact, it was so successful that Facebook acquired WhatsApp for $19 billion to eliminate a possible competitor.

Smooth Offshore Operations in the Philippines

The Philippines has a high potential and can be considered low risk when offshoring software development processes. Aside from lower labor costs, the country has skilled and experienced developers in the field.

Additionally, the Philippine government highly supports the offshore outsourcing industry. Just recently, the Philippine Gross Domestic Product recorded a growth of 11.8%. And that is only in the second quarter of 2021. This growth is due to how the IT-BPM industry reacted to the pandemic and how fast it overcame the crisis. 

What’s more interesting is how the government fully encourages the development of the IT industry. To show foreign investors’ support, PEZA gives incentives such as tax holidays, tax-free equipment importation, and visa assistance. 

Now, will you hire offshore developers in the Philippines? You don’t need to handpick your developers in the Philippines personally. You can partner with a software development company, and they’ll do the job for you. Partner with a company like Full Scale.

Offshore Software Development Services at Full Scale 

So to recap, companies use offshoring in order to do what? 

To reduce business costs, access a vast talent pool, and focus on core business activities. These are the top three reasons why companies are offshoring their business processes. You’ll find that there are other reasons for offshoring business processes.  But it always boils down to what problem the company wishes to address. 

When it comes to offshoring software development services in the Philippines, you can always trust a partnership with Full Scale. Why?

1. Intensive hiring process

We don’t just hire developers; we hire the best and dedicated developers. Our hiring process gauges the skill, work ethic, technical knowledge, and attitude of every candidate. Since we want only the best results for our clients, we make sure that our workforce works efficiently.

Offshoring has evolved from a bad name to a forerunner in business strategies. Its history is plagued with poor quality and a long turnaround time. But now,  we aim for high quality and improved production.

2. Affordable software development services

The company has helped startups and scale-ups in achieving several business goals. We accomplished all that because we understand that small to medium businesses lack the appropriate resources. Full Scale offers quick and affordable software development teams to help your company climb its way to success.

What are you waiting for? Get started right now and form your software development team today.

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