Busting the Biggest Myths About Offshore Outsourcing

By Arnab Bannerjee Feb 24, 2022
Busting the Biggest Myths About Offshore Outsourcing

Offshore outsourcing today is an ingrained reality of doing business. From sporadic outsourcing of back office operations, starting with General Electric opening an office near Delhi, India, to the steady stream of call centers sprouting up in economic hubs and industrial townships in India to the current scenario which has seen the outsourcing industry become $11 billion strong just in India (the leading offshore destination globally)- the last 30 years has changed the way we do business. Today, all portents of a business can be outsourced to close to 30 offshore destinations. Today, we outsource PHP development, digital marketing, content writing, website design, mobile app development, HR, accounts, data management- the list is a long one. And while offshore outsourcing started as a game that the big boys played, today small and medium enterprises, including startups, are seeing outsourcing as a necessary cushion that their business requires.

However, despite maturing into such a large industry over the last three decades, offshore outsourcing still attracts detractors; unfortunately, a large portion of the criticism is based on myths that have found a space in the common perception of people about offshore outsourcing. Today, I will try to debunk 7 of the biggest myths about outsourcing in an effort to present a clearer picture before you.

  • Myth 1- Offshore outsourcing is useful only in cutting costs
  • Myth 2- Offshoring means call centers only.
  • Myth 3- Offshore outsourcing results in decreased control over business and employees.
  • Myth 4- A huge initial investment is required for offshore outsourcing.
  • Myth 5- There is a difficulty in communication with offshore employees.
  • Myth 6- Outsourcing harmful for the local economy.
  • Myth 7- Outsourcing poses a threat to data security.

Myth #1: Offshore outsourcing is useful only in cutting costs

Yes, offshore outsourcing does cut costs, and does so massively. That’s an obvious attraction in outsourcing. However, costs are not the “be all-end all” of offshore outsourcing, not by a long way. While the initial offshoring initiatives had to do primarily with cutting costs, today offshoring is more about value addition and cutting down on liabilities. Many businesses today look at offshore outsourcing as a way to access talent which is locally either scarce or too expensive to hire or engage directly. This is especially true for businesses which can be classified as medium to small scale enterprises. Offshoring also is useful to cut down on liabilities and lowering risks of potential employee discrimination lawsuits since employees offshore do not fall under the jurisdiction of US laws.

Myth #2: Offshoring means call centers only

This might have been largely true during the initial phases of offshoring. However, today the scenario is very different. Due to advances in technologies like cloud computing and the advancement of AI, the number of contact centers have reduced and increasing technical work has become the mainstay of the industry. Today, local businesses don’t just outsource calling and back office jobs, they also outsource PHP development, web development, app design and development, server maintenance, accounting, legal documentation- you name it!

Myth #3: Offshore outsourcing results in decreased control over business and employees

Clients can actually keep real-time tabs on their offshore remote employee/s through Skype and screen sharing. That rules out the possibility of getting blindsided by your offshore assets. At any given point of time, you can easily track the progress of your offshore employee, provide necessary guidance and training and take stock of the situation.

Myth #4: A huge initial investment is required for offshore outsourcing

This was initially true but only due to the practice of big corporations, mostly Fortune 500 companies setting up their own “captive units” abroad. The scale of operations and the relative infancy of offshoring as a concept contributed to such an arrangement where large corporations like Dell, IBM etc found it easier and, actually, cheaper in the long run to invest in creating big local setups. However, that is no longer a requirement, thanks to proliferation of domestic outsourcing partners in outsourcing hubs like India, Philippines, Malaysia etc and staffing organizations which cater exclusively to an international clientele. Such setups have made it possible for just about anyone to engage in offshoring and there is today no lower limit to the number of resources one wants to involve, making the industry accessible to all and with zero investment requirement upfront.

Myth #5: There is a difficulty in communication with offshore employees

This is so oft repeated that it has almost become an adage. However, from there has never been a challenge where communication was concerned. Remember, offshore outsourcing started with contact centers in the first place. Had communication been a challenge, how successful would that venture have been! Offshore hubs, though now spread across the globe, are still largely concentrated in countries which either were previously part of the British Commonwealth (like India, Malaysia etc) or had a significant American connection (like Philippines). And these nations have a large number of English speakers, for most of whom, English is an oft used second language. India is a classic example. Though there are hardly any English speakers here who can claim that English is their first language, the number of people who can speak English fluently in India is second only to the United States in terms of sheer numbers. After all, had English language not been a prerequisite for identifying offshore outsourcing hubs, China would have been the global leader in outsourced white collar jobs.

Myth #6: Outsourcing harmful for the local economy

Many point out to offshore outsourcing as a reason for loss of jobs locally. That’s a very valid criticism. However, it is more true for manufacturing sector and blue collar jobs than the largely support-centric white collar jobs that are outsourced abroad. Manufacturing drives employment creation in any economy. We are well acquainted with the rust belts in the mid-west and the spectacular fall from glory of Detroit. However, if you were to say, outsource PHP development and hire a developer in India, you would hardly cause such a catastrophic result. On the contrary, studies have shown that with timely support from offshore resources, many small and medium scale businesses have been able to stay afloat and thrive on limited budgets, thus ensuring secure jobs locally. There is a significant difference and not all offshore outsourcing can be bracketed together in terms of their impact on local economy.

A case in point- James Oliver, the CEO of Oliver Technologies and an esteemed client of VE had the idea to develop hardware to prevent gun crime in the US. However, he needed the help of embedded software engineers to make his idea a reality, and resources such as these don’t come cheap locally. Hence, James looked towards India to source the right talent and hired embedded software engineers to develop his idea into a product. I quote him, “It’s no way that a middle class person like me who’s got a great idea could take it to the next level. The only way I could have got to this point was to hire engineers from India.”

Myth #7: Outsourcing poses a threat to data security

In light of what has happened in recent years, data security has become of paramount importance. Being an industry which depends on fluid movement of data all over the world, the offshore outsourcing industry and the companies which deal in outsourcing are as paranoid as anyone else when it comes to data security of theirs’ and their clients. Pretty much every reputed firm will have robust anti data theft processes in place all are governed by and adhere to local and international statuettes and practices to prevent any kind of data theft or security. One can confidently say that data in outsourcing firms is perhaps even more secure than any other industry and at worst, data in this sector is only as vulnerable as any other industry.

If data security indeed was of concern, then we wouldn’t have government bodies like Greater Cincinnati Water Works outsourcing their work to Wipro, an India tech giant. Nor would we have De Beers outsourcing to HCL- another Indian tech giant.

I hope I have been able to clear the air about myths that have long plagued the offshore outsourcing industry while alleviating needless fears one might have while seeking to source offshore talent. Our own experience tells us that outsourcing is an industry which is continuously reinventing itself, and being a true product of globalization is helping make businesses “open source”.

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