Many American companies are entering the offshore outsourcing industry. In this article, uncover why offshoring is considered an optimal business strategy for many small and large businesses.
“Why Offshoring?”, “Is Offshore Outsourcing an Intelligent Strategy for Startups?” These are a common question that arises when a startup company seriously considers outsourcing business processes in a foreign location.
One of the reasons for offshore companies is to achieve global offshoring success and gain business momentum. But, there are two main reasons why companies choose this strategic approach.
Let’s find out why offshoring is a top choice for business.
What motivates companies offshore
In the concept of offshoring, we have two dynamic heroes: startups and offshore companies. Startup Want to fight the costly margins of productivity and learning. On the other hand, offshore companies want to provide unique diversity such as a highly skilled workforce, a culturally sensitive environment and low cost IT services.
The low cost of producing goods and services in an offshore country, compared to home, motivates many companies to consider foreign options.
For example, IBM has hired more 364 thousand people worldwide Only in 2020. The New York Times once reported that there are American companies More employees in India Compared to the United States. IBM’s operations in India have helped reduce the cost of producing and supplying IT technology services to corporations and governments in the face of competition from other IT companies.
Why offshoring achieves company goals
Many companies use offshoring to achieve a few business goals that benefit their employees, investors, shareholders, and long-term financial health. Here Full scale, Our main goal is the success of our clients. We focus the laser on the degree of integration of our offshoreing practices to provide success in startups and even scale-ups at an early stage.
Our clients and companies have seen the advantages and disadvantages of outsourcing. And, here are two main reasons why offshoring is beneficial.
1. Companies use offshoring to save costs
Money is the number one factor that motivates companies from the United States to move their business processes to the Philippines and other popular offshore destinations. This method is a wise move.
However, startups often fail to recognize the important points of starting offshore operations such as objectives and key outcomes. But on closer inspection, startups with the ability to integrate best offshore practices will see the extent of their success.
American companies should not ignore the huge savings in labor costs, operational costs, lower taxes and other costs. Cost reductions continue to inspire U.S. businesses offshore to other countries.
Compared to the United States, the Philippine labor market provides direct savings. There is considerable variation between wages, employee taxes, social security, health insurance, workers’ compensation, and the cost of running a business.
Reducing costs enables key companies to free up financial resources that they can use for their local activities. This includes investment in research and development.
Moreover, it also contributes to generating additional revenue and increasing revenue, providing profits for its investors and shareholders. All of this can make the company cost-effective, productive and profitable in the long run.
Low cost of operation and production
Manufacturing industry Developing countries benefit from lower operating costs for their manufacturing process than their home countries. Companies can take advantage of low labor costs, cheap raw materials, equipment, parts and supplies to offshore locations.
Many factories abroad operate as offshore companies. These companies can produce much less than the cost of producing the same product in the United States
Many offshore manufacturing companies can make high quality and quality products according to the specifications given to their clients.
When a parent company from the United States partners with a good and efficient offshore production provider, it achieves good results. This improves the completion of the project without sacrificing production efficiency, rapid production changes and product quality.
Service industry Their business processes abroad also benefit from offshoring. Many of them establish coasts in skilled and experienced workforce countries or hire offshore service providers. Most of these employees are willing to work outside of regular office hours. This results in 24/7 operation.
This working setup is useful for call center and software development companies in the United States because in-house employees can delegate any unfinished work to an offshore team. This ensures a smooth transfer of tasks and uninterrupted work on projects.
Lack of skilled workers
Many companies in the United States have expressed their feelings Lack of staff Today is a big problem. Finding employees with the necessary skills is one of the main reasons why their offshore business processes move to other countries.
Foreign workers in offshore countries have a lot of talent. Employers can ensure that these workers have the qualifications, work experience and skills required by companies.
Other factors that motivate companies offshore
In addition to savings in costs and tax benefits, other factors that motivate companies to offshore their business processes are tax incentives. Tax benefits include tax holidays, less corporate tax and tax and duty-free imports for a certain period of time.
Many countries offer Tax holidays Complete or partial exemption of a company from paying corporate income tax. This is in exchange for establishing a new business or expanding their existing business.
Various tax incentives provide cost-saving benefits, increase revenue and retain funding. In addition, savings help grow steadily and expand business in the countries where they are located.
A good example of tax incentives given to offshore companies can be found in the Philippines. There are primary government agencies that provide investor incentives: Philippine Economic Zone Authority And Board of Investment. These firms provide liberal tax incentives for foreign firms that establish new businesses or expand existing activities.
A company that qualifies for the incentive gets 100% exemption from corporate income tax for four to six years. Upon expiration of the tax holiday, the company will receive a special tax rate of only 5% on total income and will be exempt from paying all national and local taxes. The company will also receive tax and duty-free imports of equipment, spare parts and supplies.
This tax incentive has contributed to making the Philippines one of them Top offshoring destination For IT companies.
Why offshoring is best with full scale
Your journey in offshoreing begins with us. Our highly skilled team will help you reduce operation costs and improve productivity. We will help you to create solutions efficiently, thus generating more revenue in the long run
The full scale is a Company in Cebu City, Philippines, which works with offshore resources and focuses on the important areas needed for your startup. We’ve helped American companies grow and expand by partnering with them to set up offshore operations at Cebu.
Despite having ample opportunities in offshoring, startups fail every day. This is primarily due to failed relationship management. Remember that this is a partnership, and startups must consider their offshore employees as part of their family – your startup. Many startups make this mistake which ultimately indicates the failure of an offshoring strategy.
But Full scale Believe otherwise. We see that offshoring is a mandatory strategy for startups. At the moment, we provide teams and services to dozens of clients in the United States and build business momentum and encourage their growth. Contact Learn more about our offshoring services today.