Small Businesses and Offshoring
Small businesses are facing increasing pressures in the current economic climate, largely through increased competition and rising costs. The highest cost in many organisations is staffing, and the increased competition often comes from those companies who have solved the high-cost staffing problem.
Large organizations have been outsourcing or offshoring for many years. We can probably all remember the first time a local call we made was answered by someone far afield in an Indian call centre. And sadly, many of us had such bad experiences in these early days that we don’t like the prospect of talking to someone offshore.
Outsourcing versus Offshoring
In the last 10 years there has been a significant increase in understanding how to effectively outsource or offshore. But firstly, what is the difference between the two?
In offshoring, a company will open a branch of their organization in another country, typically one with lower cost staffing with the right skills for their needs. The staff will work for their company, be on the company payroll, be entitled to all the same benefits and committed to all the same company policies and regulations. Your local bank may have an office in India for example, that performs back-end financial reconciliations.
Outsourcing is where a company engages with an organization already operating in a country offering lower cost staffing. These staff are assigned to a specific account, associate with the company they are working with, but their day-to-day needs and employee regulatory requirements are taken care of by the host company. Your local bank may also engage a large firm such as IBM to do its information technology work, with IBM in turn using their staff in India. In this case, the bank is outsourcing.
Outsourcing Benefits for Small Business
Small businesses have typically not considered offshoring because of the prohibitive start-up and ongoing management costs. Outsourcing has not been on the radar because of the tendency of small businesses to employ local staff or even friends and relatives.
But rising competition means that some businesses are making use of offshore centres, and reaping the financial benefits that it affords. For example, one local real estate agency hired one administrative assistant in the Philippines at an annual cost of AUD$20,000. This assistant took over some of the clerical activities of the rental manager, the bookkeeper and two of the sales staff, increasing their productivity substantially. Within 2 months, the administrative assistant had paid for herself in increased sales.
Learn More About Outsourcing
If you’re not sure if outsourcing is right for your business, contact us and one of our team members will call you or meet with you in person.