Main Benefits of Running a Business Process Offshore

Relocating a certain business process abroad may sound challenging, especially for the businesses which are just getting started with offshoring. Let’s discover all the benefits of this tactic to reveal all the doubts.

Top 10 Advantages of Offshoring for Your Business Growth

Reducing operational costs along with increasing efficiency is the ever-green rule of business growth and development. Running some of the processes offshore can be a value-adding tactic that can be perfectly aligned with business-specific goals, so in this article, we suggest taking a look at the essence, types, and main benefits of offshoring to help you decide whether such a strategy is suitable for your company in 2022.

Offshoring in a Nutshell - Definition, Types, Tactics

In the broadest meaning, offshoring means setting up and running certain business processes offshore - that’s beyond the boundaries of the continent the company’s homeland is located. Usually, such a strategy is chosen by the companies experienced with remote management under the condition that the cost for certain services, necessary equipment, and production processes is lower offshore, compared to the homeland country.

Types of Offshoring

Depending on the chosen destination to run a certain business process, there are three types of offshoring. 

• Offshoring, as the name suggests, is moving the business process offshore, for example, from the US to India. 
• Nearshoring. Nearshoring means choosing a less distant destination, for instance, the US company nearshores its business process to the UK. 
• Onshoring. Onshoring is the process of setting up and running the business process on the continent the company is located in. For example, the US company from NY runs a certain process in CA. 

Depending on the specifics of the offshored process, there is one more classification. 

• Product offshoring. As the name suggests, product offshoring means producing a company's products in a remote country. In this way, Samsung built a new plant in India to produce smartphones, and Ford offshored their manufacturing process to China and Mexico. 
• Service offshoring. Service offshoring is relocating service activities abroad. According to this logic, Amazon has its customer support in South Africa, plus offshored its research and development center to Ukraine. Google, in turn, partially offshores and outsources its software development to tech vendors and remote employees. 

But despite greatly overlapping benefits, offshoring and outsourcing are different business strategies that are frequently mixed up. 

• Outsourcing means using the human resources of other companies to perform a certain task, regulated by a contract. For example, software development outsourcing is a tactic that implies hiring a remote tech team, provided by a tech vendor located abroad. 
• Offshoring is relocating a product manufacturing or service delivery to another country, for instance, establishing an offshore development center abroad. 

In our recent articles, we have already dwelled on the benefits and tactics to create an offshore development center, and now let’s take a deeper look at the main advantages of offshoring as a strategy. 

10 Value-Adding Benefits of Offshoring and Offshore Software Development

Running your business processes offshore becomes an ultimately beneficial tactic when such a strategy is planned well, with all the pros and cons in mind. Below are the main advantages of offshoring which are relevant for businesses in any industry.

1. Lower operational costs. This is the top benefit of offshoring. The significant difference in economic development, equipment, construction, and rent costs allows for decreasing operational expenses in a low-risk way. 
2. Lower labor costs. The opportunity to hire both qualified and non-qualified workforce is another leading benefit of offshoring. This advantage is especially important for the companies that need a lot of personnel to deal with routine tasks, for example, on production lines. However, offshoring allows for hiring top-skilled specialists at a lower cost as well  - that’s why many companies with huge IT departments decide to relocate them offshore. 
3. Different destinations to choose from. There are a lot of winning destinations for offshoring, and each of them can be perfectly tailored to the project specifics, goals, and budget. For example, product manufacturing companies often build plants in Taiwan to access a cheap workforce, while those businesses on the way to digital transformation hire top tech talents in Ukraine or Azerbaijan, as an option. 
4. Better efficiency of a domestic team. Running some of the processes offshore also creates a more favorable working environment for a domestic team since it can focus on the highest-priority tasks that should be implemented onshore. For example, such non-core activities as software development and online customer support can be relocated abroad, so that a core team can deal with the most important challenges and keep the focus on business growth. 
5. Simplified taxation. Most of the promising offshoring destinations have an investment-friendly taxation system. For example, the companies eager to offshore their software development to Ukraine can hire programmers according to the private entrepreneurship model. Hiring an offshore software development team in Azerbaijan would also be easy since the country greatly welcomes tech innovations and creates a favorable business environment for foreign companies. 
6. Access to global talents. Offshoring is a beneficial strategy regardless of the proficiency level of the employees you would like to hire. It opens up an opportunity to access the global workforce along with top talents from any industry. When it comes to running software development offshore, you are welcome to collaborate with the best programmers skilled with the technologies your project needs. For example, Ukraine and Azerbaijan offer great pools of JavaScript developers, and we, at SpaceBus, would be happy to help you with hiring them.
7. Better control. When it comes to service offshoring, the business may choose between offshoring (setting up your own business unit in a foreign country) or outsourcing (hiring necessary specialists remotely). Offshoring as a strategy comes with better control opportunities, compared to outsourcing. When the outsourced process is fully controlled by the vendor, offshoring implies creating something like a remote department that can be managed by the responsible employee assigned by the company itself. 
8. Sustainable scaling. Growing and scaling an offshore business process in a sustainable way is another beneficial opportunity this tactic comes with. For example, when the company sets up an offshore development center with the help of a tech vendor, the latter sources the necessary human resources supports with solving all the organizational issues and helps with staying legally compliant. The ODC created in such a way is easy to scale or adjust, extending or shortening the team. 
9. Several offshoring tactics to follow. Running a business process offshore is a pretty flexible strategy since there are several tactics you can mix to take the best from both worlds. For example, you can create an offshore development center and hire local developers to support your IT infrastructure. Along with it, you can outsource non-core business processes like marketing and testing, combining different approaches into a holistic strategy to get the ultimate value at a lower cost. 
10.  Taking advantage of remote business processes. In our recent articles, we have already discussed the benefits remote work has. This trend is here to stay, so getting started with offshoring also means an opportunity to get all the advantages of a remote work model for your business. So, consider creating flexible work conditions for your offshore team to increase their productivity, improve retention and save renting costs.

Conclusion

Migrating non-core business processes offshore can be a winning business development strategy, especially if you have a trusted consulting company nearby. SpaceBus would be happy to support you with creating an offshore development center in Azerbaijan which is a pretty promising destination to locate your IT department.