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Today, businesses have many options when it comes to global outsourcing for some services or even entire departments. There is also the option to outsource domestically. 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.
The right answer for you will depend on the type of business you run and the field in which you operate. For example, start-up companies can really benefit from the cost saving aspects of global outsourcing, whereas it may not suit a locally-focused enterprise.
Nearshoring, too, can operate as a sort of halfway house for some businesses, allowing a global outlook and reach while mitigating some of the drawbacks to working across borders. This is especially useful for companies who are worried about external factors such as geopolitical events affecting their operations.
What is global outsourcing?
Global outsourcing involves hiring a company based in another country to handle some of your business operations. Some of the most popular services include manufacturing, IT, customer support, and HR.
With the rise in remote working in recent years, it has become easier and easier to collaborate across borders and work with an international team, either with individual workers or for entire departments where necessary, such as global payroll outsourcing.
Some companies like to work with specific countries, whereas others prefer to cast a wide net and have a truly diverse workforce. The former option means more homogeneity in the workforce, but also limits options. The latter means more potential culture clashes, but allows for a much greater reach worldwide.
The benefits of global outsourcing
Some of the top benefits of global outsourcing include:
- Reduced costs. One of the biggest advantages of global outsourcing is cost savings. Highly-trained workers in your home country may command high wages due to a high cost of living. However, in other countries, similarly highly-skilled individuals might well be relatively inexpensive to hire.
- Tax incentives. Many countries want to attract foreign direct investment. As such, they offer many incentives for businesses to outsource work to their country, including tax incentives and other benefits.
- New perspectives. When you outsource globally, you can tap into a unique set of skills and talent that may not be found in your home country. If you’re looking for different ideas or a new approach to doing business, then global outsourcing could be right for you.
- Expand quickly. With access to large highly-skilled talent pools at very affordable rates, your company can ramp up production quickly, hiring a large team for your global outsourcing needs.
Global outsourcing does create some issues, though, and you need to be aware of some things that you will have to manage.
- 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.
- 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. The good news is that you can hire a Professional Employer Organization (PEO) such as Serviap Global to handle all of this compliance for you.
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.
Outsourcing domestically means 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 same place as you and that makes communication easier.
It will also be easier to do business with a company located in the same country 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.
Depending on what you’re outsourcing, shipping may be a consideration. 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. Nearshoring can be a way to retain some of these factors when outsourcing globally.
While you certainly can save money by outsourcing certain services domestically, you won’t get as much cost-savings as you could if you outsourced globally. By working in one country, you’re also putting all your eggs in one basket, so to speak. Challenges that you face because of the local economy would be similar for the outsourcing company too.
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.
Serviap Global can help with global outsourcing
SERVIAP is a leading Professional Employer Organization (PEO) ready to help your business expand operations throughout the world. 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.
Having started out in Mexico, we have grown during more than a decade of operations to establish a global presence, in the process earning a reputation as experts on hiring in emerging markets.
Contact us to learn more about how we can assist you with global outsourcing to expand internationally.