Offshoring has become a buzzword in business, promising to reduce costs and increase efficiency. Companies are eager to jump on the bandwagon and take advantage of the benefits that offshoring can offer. However, some of the hype surrounding offshoring can be misleading. In reality, many businesses make critical mistakes when working with offshoring companies that can derail their efforts and cost them more than they save in the long run.
In fact, the sad reality is that half the companies that try offshoring fail.
Offshoring strategies are not substitutes for poor planning and management. Here are the three critical mistakes companies make when implementing their offshoring strategy.
Mistake 1: Focusing On the Wrong Things
When businesses decide to initiate their offshoring strategy, the first thing they often do is search for the cheapest country or offshoring company to work with. They will spend a lot of time researching different countries, providers, and prices to find the best deal.
While these factors are important, they shouldn’t be the sole focus of your offshoring strategy. First and foremost, a company needs to identify which processes are core(those they must control), which are critical (best delegated to trusted service providers), and which are commodity processes (the ones they can outsource without much worry). The simplest way to do this is to rank your processes by the value they provide to your customers. These rankings will vary from industry to industry. A pharmaceutical company will place more importance on its R&D team, while a telecommunications company might see more value in its customer-service team.
A company must be methodical and thorough in creating this value ranking to ensure they offshore the correct processes. Mistakenly offshoring a core process, then seeing it fail over the course of months, affecting your primary source of revenue, and having to bring it back in-house can put a massive dent in your bottom line and your company’s reputation.
The processes that are best offshored will usually be the ones near the bottom of your value ranking. And only after thoroughly evaluating its processes should a company start searching for the best country, vendor, and price to fit its needs.
Mistake 2: Poor Risk Management
Offshoring involves a certain level of risk for any business. Companies can face two types of risk during the migration of their processes: operational and structural.
The initial phase of a new offshoring strategy will undoubtedly expose your business to some operational risks. Your new offshore team handling your process will need some time to learn the ropes of your operations before they can work at peak capacity. It is likely that they will work more slowly and will commit more errors than your in-house team as they go through the learning curve.
Some of these risks can be mitigated by having thorough documentation and codified protocols for your whole process—covering different scenarios and stipulating what needs to be done as a response.
Structural risk is another issue that companies need to be wary of in their offshoring strategy. These are the risks involved in delegating your processes to another company that may not always have your business’s best interests in mind. Part of your offshoring setup should include establishing proper communication channels, productivity metrics, and quality assurance protocols. While many offshoring providers will hand over complete control of the team to you, they will still be indirectly involved in the management and development of your offshore team. Additionally, your offshoring team’s learning and development should be an ongoing and high-priority project executed in collaboration with your offshoring provider.
Before your business starts offshoring, it’s essential to conduct a thorough risk assessment, identify potential risks, and develop a plan to mitigate them.
Mistake 3: Assuming Offshoring Is a Be-All and End-All Strategy
While it may have been difficult to execute a few decades ago, companies can now use a combination of offshoring, onshoring, nearshoring, and outsourcing to reach their goals. Formulating a strategy that utilizes the advantages offered by these processes can help minimize the structural and operational risks a company may experience from just using one.
Businesses should match organization structure to their needs. Using any of the abovementioned strategies will provide different advantages and disadvantages. As such, finding the right balance of strategies will allow your company to maximize its returns and minimize losses.
Partnering with offshoring providers can prove to be valuable for businesses looking to reduce costs and improve efficiency. However, it’s important to realize that it’s not a one-size-fits-all solution. Not all processes or services are suitable for offshoring. It’s essential to identify which ones will benefit most from this strategy and which ones will have a better effect with alternative options.
While moving all your business processes to a cheaper location may be tempting, doing so can lead to quality issues and a lack of control over your operations. It’s better to take a measured approach and start with small projects to gauge their effectiveness before deciding to move more significant operations offshore.
In conclusion, offshoring can be an effective strategy for businesses looking to reduce costs and improve efficiency. However, avoiding these critical mistakes is essential when designing and planning your offshoring strategy. By identifying the right process to offshore, managing risks, and using offshoring in conjunction with other strategies, businesses can ensure that their offshoring efforts are successful and yield the desired results.
iSupport Worldwide Is the Reliable Offshoring Solutions Provider For Your Business
We stated earlier that most companies that try offshoring fail. However, that’s not the complete story. They fail because they do not have a reliable offshoring provider to help them navigate common pitfalls in implementing the strategy.
iSupport Worldwide is the reliable offshoring solutions provider your business needs to succeed. We’ve partnered with companies from industries, niches, and verticals to help them smoothly execute their offshoring strategies.
We offer talent recruitment, infrastructure, and end-to-end support for all your offshoring business needs.