In a pandemic-driven business landscape, doing business can be challenging if organizations don’t find a way to adapt to the current situation. The business landscape has changed through the years, but with the current state of affairs, it has been in a constant state of flux. Businesses have found it necessary to be innovative and find ways to circumvent obstacles—both old and novel. While offshoring or business process outsourcing isn’t a new approach by any means, it has become a go-to solution, especially now, as businesses navigate the challenging landscape brought about by COVID-19. It helps reduce labor costs, which is arguably one of the largest expenses of a growing business. Offshoring also expands your talent pool and provides greater availability by tapping regions in different time zones. The IT industry is one of offshoring’s biggest markets, and the estimated value of the global IT outsourcing market by the year 2026 is $425.19 billion, a 4.5% growth (CAGR) from $318.5 billion in 2020.

While offshoring helps maximize a company’s resources, the process can be a challenging one, especially because you need to build a strong relationship with a supplier or third party. Before transferring business processes and knowledge to another organization, you must ensure that expectations are aligned and that communication lines remain open in case any issues arise.

The Common Pitfalls of Offshoring

Today, even small businesses outsource at least one of their business processes to increase overall efficiency. Startups have also resorted to offshoring or outsourcing business processes in an effort to cut costs and fast-track growth. However, it’s not as simple as hiring freelancers or contracting with a third party. There are several things to consider first before taking the offshoring path. Below are the common challenges of offshoring.

Not Choosing the Appropriate Location and Supplier

Before signing a contract with an offshore service provider, first consider the location. There are several other aspects tied to a physical location, including skill availability, attrition rates, legal issues, geopolitical issues, and currency fluctuation, among others. Culture compatibility should also be considered; this should be attained at a corporate, process, and day-to-day interaction level. To bridge cultural barriers effectively, organizations can implement several strategic solutions:

• Cultural training programs: Equip teams with cultural training to understand and appreciate different communication styles. This can pave the way for smoother interactions and mutual respect.

• Consistent communication: Establish clear and consistent communication protocols. This helps in building a strong working relationship and ensures that everyone is on the same page.

• Open lines of communication: Create open channels for dialogue by planning regular video conferencing meetings. These meetings foster familiarity and help team members become accustomed to each other’s language nuances and communication patterns.

• Regular interaction: Encourage frequent interactions. Over time, this will lead to a deeper understanding of each other’s cultural contexts, enabling teams to read between the lines and collaborate more effectively.

By integrating these practices, companies can enhance cultural compatibility and foster a more harmonious and productive working environment across borders.

Loss of Control Over Processes and Knowledge Transfer

This should be discussed and agreed upon at the onset; there will be a perceived loss of control over processes as some of them are handed over to the service provider. This and the consequent transfer of knowledge can present internal challenges that are better addressed before contracts are signed and agreements are finalized.

Not Considering Cost Overruns

The reason why most offshoring ventures fail is because they fail to assess and realize the overall total cost of the process. It’s a mistake to focus solely on the wage cost arbitrage when taking your business processes to an outsourcing company. Consider all costs and expenses—both direct and indirect—to avoid perceived cost overruns.

Underestimating the Transition

The most challenging period when offshoring is the initial transition process, especially when offshoring for the first time or with a new outsourcing company. As with any new venture or transformation effort, this process should be rigorously planned, flawlessly structured, and should have the full commitment of senior management. This would help in the procurement of the resources necessary to make the initiative successful.

Non-existent Data Security Protocols

Business process outsourcing and knowledge transfer entails providing access to certain critical data to a third party. There should be strict data protocols that your chosen provider adheres to unconditionally. This is vital because a data security breach can lead to more serious problems that could affect both your business and your customers.

Mismatched Expectations

Expectations should be aligned even before considering a partnership with an outsourcing company. The misconception most companies have is that they are offshoring roles or personnel, which isn’t the case. In an outsourcing venture, they are offshoring processes, services, and activities.

Mismanaged Communications

Communication is an oft overlooked but vital aspect of offshoring, and mismanaging it can lead to catastrophic consequences. Every aspect of communication should be managed to the littlest detail; the timing and level of communication is very important. Providing information too early raises apprehension; providing it too late could run the risk of misinformation. You should also ensure that you are talking to the right person regarding certain aspects of the offshoring venture to save time and make communications more efficient.

Effective communication and expectation management with offshore teams can make or break a project’s success. To achieve this, businesses need to adopt good practices, including the following:

• Document everything
  Always ensure that every piece of communication, especially instructions, is documented. When you put all directives in writing, it prevents the loss of crucial details during translation. It also provides your offshore team with a reliable reference while working on the project.

• Encourage confirmation
  During meetings, particularly virtual ones, don’t just rely on non-verbal cues like nodding. Ask your offshore team leader to repeat the instructions in their own words. This practice can unveil misunderstandings early, allowing you to clarify and ensure everyone is aligned with the project’s requirements.

• Schedule regular alignment meetings
  Frequent meetings are essential to keep both onshore and offshore teams synchronized. These sessions not only foster stronger relationships but also help verify that both teams share the same objectives. Regular check-ins can prevent misaligned goals and help track progress effectively.

By adopting these strategies, businesses can build a robust framework for clear and effective communication, reducing the risk of mishaps due to mismanaged expectations with offshore teams.

Avoiding Pitfalls and Addressing Offshoring Challenges

Who does what from where is not as important as how it’s done and how the outcomes are measured. As such, there needs to be a clear and specific process that can be followed by both the client and provider before the offshoring process begins. The specific processes may vary depending on the organization, but they can be summarized into the following:

Prepare meticulously.

Offshoring requires that an organization have clear financial targets and defined outcomes so that priorities can be set. These priorities should then be validated constantly throughout the entire offshoring process. The reasons for offshoring and leveraging global delivery should also be clear to everyone in the organization, especially senior management. Below are a few key activities that should be done before proceeding with an offshoring arrangement:

• Secure buy-in and support from senior management.
• Craft a clearly defined strategy that specifies objectives.
• Define areas and processes that set the scope of the offshoring arrangement, specifically core (business-critical) and non-core (non-business critical) processes.
• Establish KPI’s for both the transition and steady phase.

Overcoming common offshoring challenges can yield significant benefits. By preparing meticulously, you create a foundation for a strong team culture, ensuring everyone is aligned with the company’s objectives. This alignment fosters open communication channels, which are crucial for maintaining productivity across borders.

Get to know your service provider.

Talking with your provider over the phone or via a video call isn’t enough; you should visit the provider’s offices and get a feel for their processes and see how they work. Seeing the process firsthand will allow you to audit the provider and make some tweaks into certain parameters like HR processes, working standards, and compliance with local regulations. In return, you should also allow your provider to get to know your organization. During the planning stages, providing them pertinent data about your processes, tools, and applications will help them during the transition phase.

Building a relationship with your service provider not only helps in ensuring compliance and quality standards but also strengthens collaboration. This relationship is key to overcoming initial challenges and achieving a highly engaged workforce that feels connected to your organization’s mission.

Manage the transition process.

Startups shouldn’t underestimate the transition process when engaging with a third-party provider. It’s advisable to have a dedicated program management office or platform that both parties can use in fulfilling requirements and dealing with issues and challenges along the way. Both parties should be represented in said platform to ensure effective reporting and solutions that are in the interest of both the organization or client and the service provider. Managing an offshore team can also present unique scheduling challenges, but with the right strategies, these can be effectively navigated.

• Anticipate Key Dates and Holidays: Understanding important dates and holidays in your offshore team’s region is crucial. By familiarizing yourself with their calendar, you can plan activities and deadlines in advance, minimizing unexpected delays. It’s essential to consider both official and informal holidays. Engaging with your offshore counterparts about their local traditions and typical holiday activities can help you gauge their availability, setting realistic expectations.
• Implement a Robust Scheduling Process: A structured scheduling approach is vital for seamless operations. This involves strategically planning meetings and project phases within flexible timelines. Establish clear communication about how much preparation time your offshore team needs for meetings and important tasks. By marking these dates on a shared calendar, both onshore and offshore teams can stay synchronized and avoid last-minute scrambles.
• Optimize Overlapping Work Hours: Identifying overlapping work hours between the onshore and offshore teams is key to efficient collaboration. For instance, if your local team operates from 9:00 AM to 5:00 PM and the offshore team from 3:00 PM to 10:00 PM, utilize this common timeframe for crucial discussions and collaborative tasks. This overlap ensures real-time communication and faster problem-solving, enhancing productivity.

By employing these strategies, companies can effectively address scheduling issues, creating a more cohesive and responsive offshore collaboration environment.

Ensure smooth operations after the transition.

Even as the offshoring venture moves into “operational mode,” you should still make an effort to ensure that established processes run smoothly and without a hitch. Learn from your experiences during the transition period and ensure that everything is clear-cut when it comes to incident management and change requests. You should also consider reducing worker turnover in offshore teams, which requires strategic and thoughtful human resource practices. Here are some effective ways businesses can tackle this issue:

• Develop strong team dynamics: Foster a sense of belonging and cohesion within teams. Implement team-building activities and encourage collaboration across all levels to create a unified work environment.

• Implement an attractive incentive system: Offer competitive salaries and diverse incentive packages that include benefits such as performance bonuses, health insurance, and career advancement opportunities. Recognize and reward outstanding performance to motivate employees to stay.

• Enhance communication: Establish clear and open lines of communication. Use real-time chat and private messaging tools to ensure consistent connectivity between team members and management, enabling a smoother workflow and quick resolution of issues.

• Provide career development opportunities: Encourage continuous learning by offering training programs and professional development courses. There are several online webinar and educational platforms that can provide the necessary skills to keep employees engaged and invested in their roles.

• Ensure cultural sensitivity and inclusion: Respect and embrace cultural diversity by organizing cultural sensitivity training. Foster an inclusive environment where all employees feel valued regardless of their background or geographic location.

• Regularly gather and act on feedback: Conduct regular surveys and feedback sessions to understand employee concerns and address them promptly. Utilizing online survey platforms can help streamline this process. Employees who feel heard are more likely to remain committed to their organization.

Focusing on these areas can effectively reduce turnover in your offshore teams, resulting in a more stable and productive workforce. 

Successfully managing offshoring aspects will lead to a workforce that is not only efficient but also highly productive, driving the success of your offshoring initiative. As with any change, there will be an adjustment period as you try to find the balance between doing things in-house and offshore. Having the right partner will help make the transition smoother, simpler, and quicker.

Explore how nXscale can help you build your team and scale your business while avoiding the pitfalls listed above.