Globalization and innovative technologies provide options to save costs and optimize business processes in a viable way.
IT offshoring is one of those options. It's an activity in which many companies across Europe and the United States have been engaged for decades.
What is offshoring in business? In layman's terms, it means having some of your internal business activities delivered on behalf of your company in another country. The most popular offshoring destinations are Asia (India, the Philippines) and Eastern Europe (Ukraine, Poland) where lots of professionals have high English proficiency and strong work ethics.
We at NCube view offshoring as an extension of the client’s business. You have a virtual team here in Ukraine, but it’s your employees, your agenda, and your company culture.
Before we go over the offshoring pros and cons, which roles can be offshored? The most popular ones are software development, virtual assistance, payroll, data entry, administration, SEO, outreach, data research, customer support. It can be any role outside of your core competence. For example, one of our clients, a company based in Chicago engages Data Science experts from Ukraine.
It’s essential for a business to understand the advantages and disadvantages that come with the offshoring work model before they apply it in their operations. In this article, we take a look at the pros and cons of offshoring. Read on if you are still weighing those.
Advantages of offshoring
- Reduce costs
The biggest advantage of offshoring, and the reason why many companies consider this strategy, is cost savings. It’s more profitable to hire resources at a lower rate in countries with cheaper labor cost instead of engaging expensive local specialists.
With offshoring, you can get the same work done at a much lower cost. For example, hiring a developer in the USA or Western Europe will cost around $50–$250 per hour. The cost of an offshore developer ranges from $25–$50 an hour, depending on skills and experience.
- Access skills you struggle to find in your region
Another reason to engage the offshore workforce is a variety of specialists with a wide range of skills. For example, Ukraine has a large pool of software engineers as well as a strong STEM education basis, which makes it an ideal destination for building a virtual software development team.
- Easily scale up and down
Offshore teams are easily scalable. If the project requires to bring in more hands, you can do it almost instantly. The offshoring services would quickly find necessary specialists, without affecting the business processes.
- Help with your current project
Unlike the outsourcing model, where a team takes on a project and develops it from the ground up, offshore resources can step in at any stage of the project and bring it up to speed, even. Offshore teams, however, require a great deal of control on your part as the staff usually don’t have enough responsibility to work autonomously, or without directions from the leaders for that matter.
Disadvantages of offshoring
Despite numerous advantages, offshoring has some disadvantages as well. Below are some of the most common ones.
- Time difference
It’s difficult to communicate with the team located on another continent. Even in the technology era we live in, it’s still more convenient to work with the staff in the same time zone and which you can see regularly. Making sure your offshore engagement is successful requires thorough planning and making the most of your communication sessions, which occur during the cross-over hours.
- Running an offshore team might be laborious
While the team is fully dedicated to achieving your goals, you need to be deeply involved in the process at the same time. You are responsible for establishing the communication processes and coordinating the delivery processes. This way you ensure that the end result is up to your company’s standards.
- Language and communication barriers
Offshoring is a multicultural concept, with members having different language proficiency and communication patterns. That being said, you should understand that lots of work goes into hiring people who are tailor-made for working remotely and preferably have previous experience being a part of a distributed team.
- The risk of exposing confidential information
Many operations you might want to offshore involve handling sensitive information, potentially exposing your company to the risk of data theft. Thus, there is a need to implement security standards and strategies on your end, without relying solely on the offshoring vendor. Also, consider using such services as security audit and CCTV.
Further Reading: Getting Virtual Teams Right.
Benefits of offshoring with NCube
At NCube, we have 11 years’ experience working with companies looking to implement the offshoring strategy. Together with the Client we mutually agree on the required resources and build a team of dedicated engineers that suit the clients’ demands. The team acts as a seamless extension of the Client’s team, working full-time, 5 days a week, from our office in Kiev, Ukraine.