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Today, businesses have many options when it comes to outsourcing services or even entire departments. Businesses can outsource to a domestic company based in the U.S. or overseas. There are pros and cons to each model. If you’re trying to make the decision as to which is right for your business, explore this guide on domestic vs global outsourcing.
SERVIAP can help with your global expansion needs. Contact us today to learn how you can expand your business with PEO in South America and Latin America.
Domestic outsourcing involves hiring a company based in your country to handle some of your business operations. You'll be sending the work out-of-house but keeping it in your country:
Here are some of the top benefits of outsourcing domestically:
- Language & Culture. One of the main advantages to domestic outsourcing is you won't have to adjust to different cultures and potential language barriers. When you outsource domestically, you'll be dealing with a company that is based in the U.S. and understands how business is done here. Communication can be much easier thanks to this.
- Time Zones. It will also be easier to do business with a company located in the U.S. because time zones will likely be the same of very close to your main office location. When your local and outsourced team operate in similar time zones, collaboration can be improved.
- Shipping. Shipping domestically will be a much easier process than international shipping, depending on what you're outsourcing. Goods that are shipped within the country don't have to face as many regulations, and products can typically be sent and received much faster. The cost of shipping domestically is also much cheaper.
- Local Networking. When you outsource domestically, you can build solid relationships with other suppliers in your country. The company you outsource to may be able to connect you with other domestic suppliers, vendors, and potentially even customers.
- Consumer Confidence. Keeping business within the U.S. is a hot-button topic, and this is something you can market to your customers.
Here are the main disadvantages of domestic outsourcing:
- Cost. While you certainly can save money by outsourcing certain services, you won't get as much cost-savings as you could if you outsourced globally.
- Lack of Diversification. When you outsource domestically, you're also putting all your eggs in one basket, so to speak. For example, if the economy goes down in the U.S., you could face a lot of financial challenges with the company you outsource to. Challenges that you face would be similar challenges the outsourcing company would face, too.
- Lack of Innovation. If you need creative or outside-the-box thinking, domestic outsourcing might not be right for you. Many U.S. companies think alike, because they are trained in similar ways by similar people. In other words, you may not be getting as much creativity as you'd like, depending on what it is that you're outsourcing.
Global outsourcing involves hiring a company that's based in another country to handle some of your business operations. Some of the most popular services U.S. companies outsource globally include manufacturing, IT, customer support, and HR.
Here are some of the top benefits of global outsourcing:
- Reduce Costs. One of the biggest advantages to global outsourcing is cost savings. Compared to similar positions in the U.S., most workers in foreign countries make considerably less in wages. You can hire talent with equivalent skills and experience to workers in the U.S. for significantly less.
- Tax Incentives. Many foreign countries want to attract U.S.-based companies. As such, they offer many incentives for businesses to outsource work to their country, including tax incentives and other benefits.
- New Perspective. When you outsource globally, you can tap into a unique set of skills and talent that may not be found in the U.S. If you're looking for different ideas and a different approach to doing business, then global outsourcing could be right for you.
- Expand Quickly. With access to large, skilled talent pools at very affordable rates, your company can ramp up production quickly, hiring a large team for your outsourcing needs.
Here are the main disadvantages of global outsourcing:
- Time Zone Differences. Depending on where you outsource, you could be very far away from the company you're working with. This could make communication challenging, especially if the normal business hours could be significantly different. Many U.S. businesses today are considering outsourcing to Latin America as opposed to China or India, because Latin American countries have time zones very similar to the U.S.
- Language & Cultural Barriers. There may be a potential language barrier that could affect communication. Even in countries that have a high level of English proficiency, there may be some hiccups in communication because of the different nuances of culture.
- Physical Distance. The physical distance could also be a challenge if you need to be more hands-on with your outsourcing company. Shipping goods or traveling to the country will be more difficult and costly than traveling domestically.
- Rules & Regulations. Finally, there are foreign rules and regulations you'll have to abide by when you outsource globally. This can be a complex process with a lot at stake. The good news is that you can hire a Professional Employer Organization (PEO) like SERVIAP to handle all of this compliance for you.
Expand Your Business with SERVIAP
SERVIAP is a leading Professional Employer Organization (PEO) ready to help your business expand operations throughout the Western Hemisphere. PEO is a model of co-employment, where we assume total responsibility for your talent, allowing you to focus on the strategic activities of your organization. Contact us today to learn more about how you can expand your business in South America and Latin America.