Offshoring Without Outsourcing
- Bridge Offshore Strategies
- Aug 21, 2024
- 3 min read
The outsourcing trend, which gained momentum in the late 1980s, remains robust and shows no signs of abating. The Business Process Outsourcing (BPO) market continues to expand significantly. Its global value is projected to surge from $260 billion in 2022 to an estimated $708.8 billion by 2032 (Business Process Outsourcing Market Size, Share, and Trends 2024 to 2034, 2023). The Asia-Pacific region is anticipated to experience faster growth than any other global region in the coming years.
An emerging alternative offers not only better access to global talent and cost reduction, but significant advantages as far as organic integration, organisational flexibility, improved efficiency and risk reduction. While set-up may take more time and effort, the preference for in-house offshoring over BPO outsourcing is becoming increasingly apparent.
Control and Flexibility
One of the primary advantages of in-house offshoring is the level of control and flexibility it offers businesses. By establishing their own offshore teams, companies retain direct oversight over operations, processes, and workforce management. This control allows for quicker adaptation to changing business needs, seamless integration with existing workflows, and the ability to enforce specific quality standards and security protocols tailored to their requirements.
In contrast, BPO outsourcing often involves relinquishing some control to third-party providers. While outsourcing can streamline processes and reduce administrative burdens, it may also introduce complexities in managing vendor relationships, aligning service levels with internal standards, and maintaining transparency across operations.
Alignment with Strategic Objectives
In-house offshoring enables companies to align offshore operations more closely with their strategic goals and corporate culture. By integrating offshore teams into the broader organisational structure, businesses can foster a unified corporate identity, enhance collaboration between onshore and offshore teams, and promote a cohesive approach to achieving long-term objectives. This alignment is particularly beneficial for functions that require deep integration with core business functions, such as research and development, product development, and specialised customer service.
Conversely, BPO outsourcing, while efficient for non-core or standardised processes, may not always prioritise alignment with the client's strategic vision. Providers typically serve multiple clients with varying priorities and may not offer the same level of strategic alignment and commitment as an internal offshore team dedicated solely to the company's goals.
Intellectual Property Protection and Security
Maintaining intellectual property (IP) protection and data security is a paramount concern for businesses, especially when outsourcing critical functions. In-house offshoring provides greater control over IP management and cybersecurity measures. Companies can implement stringent security protocols, conduct regular audits, and enforce compliance with global data protection regulations directly within their offshore operations.
On the other hand, outsourcing sensitive functions to BPO providers requires diligent vetting of security measures and contractual agreements to safeguard proprietary information. While reputable BPO firms invest heavily in cybersecurity and compliance, the risk of data breaches and IP infringement remains a consideration for businesses entrusting critical operations to external parties.
Long-term Cost Efficiency
While initial office-based setup costs and operational expenses may be higher for in-house offshoring compared to outsourcing, the long-term cost efficiency can be advantageous. For companies open to a largely or purely remote in-house offshore operation, workforce costs are 70-80% lower than in the US, UK, Australia or New Zealand. Even for a traditional office setup, once established, internal offshore operations offer higher cost savings over time, especially for functions requiring sustained investment in talent development, technology infrastructure, and process optimisation.
BPO outsourcing, while initially cost-effective for labour-intensive and non-core functions, incur additional costs associated with service fees, contract renegotiations, and managing vendor relationships which generally reduces the gap between onshore and offshore salaries to 20-30%. Over time, the cumulative costs of outsourcing could outweigh the benefits of internalising operations, particularly for functions where continuity, quality control, and scalability are critical considerations.
Conclusion
In conclusion, while BPO outsourcing remains a viable strategy for many businesses seeking operational efficiency and scalability, in-house offshoring offers distinct advantages in terms of control, strategic alignment, intellectual property protection, security, and long-term cost efficiency. The decision between these approaches ultimately depends on the specific needs, priorities, and risk tolerance of each organisation. By carefully evaluating these factors and weighing the pros and cons, businesses can determine the most suitable approach to leverage global resources effectively and sustainably in today's competitive landscape.
Precedence Research. (2023). Business Process Outsourcing Market Size, Share, and Trends 2024 to 2034.
