Are you struggling with skyrocketing operational costs and wondering how to cut them without cutting back on profit?

Adopt two popular strategies that have worked for many in the last two decades: outsourcing and offshoring most of your operations to reduce overhead costs, internal resources, and production lifecycle by one-fifth.

While both methods involve leveraging external resources and expertise, they differ in their execution and implications. Do you want to know how? Read on.

Is Outsourcing Cheaper?

How Does Offshoring Differ from Outsourcing?

Outsourcing refers to hiring third-party agencies to handle specific business functions or processes.

Unlike sourcing tasks to other agencies, Offshoring involves relocating business operations to another country.

It allows you to access expert skills, advanced technologies, and cost-effective labor that may not be available internally, including IT services, customer support, human resources, manufacturing, and logistics.

It benefits from lower labor costs, economic conditions, and varying time zones, usually third-world nations with minimal wages and high human capital, such as Nepal, India, and Vietnam,

Did you know 59% of businesses outsource tasks to avoid the expenses related to hiring and maintaining full-time employees, such as salaries, benefits, and training?

You can offshore basically any task to not only reduce costs but also run operations around the clock

It helps businesses scale operations quickly without significant upfront investments in infrastructure and staff.

A key benefit of Offshoring is labor cost savings. For example, hiring a software developer in the US costs around $110,000 annually, whereas employing a developer in South Asia can range from $20,000 to $30,000 annually.

Is Outsourcing and Offshoring a Right Solution For You?

If you are an enterprise constantly looking to reduce costs and increase profits without cutting corners, outsourcing and offshoring may be your only solution.

Let us explain to you the merits of these two popular concepts.

1. Lower Overhead Cost and Higher Profit

Overhead expenses often occupy the most significant portion of any business’s operating cost; therefore, keeping it minimal and substantially increasing net revenue requires offshoring to optimal locations like Nepal, where the average pay is four or five times less.

For example, suppose you outsource most of your IT support services, such as customer support. In that case, you can eliminate the cost of setting up office space, retaining equipment, and paying utilities for these employees.

Furthermore, you get to tap into a global talent pool with expert skills that may not be available locally.

2. Shift Focus on Core Business Activities

Outsourcing non-core functions gives you more freedom to focus on core business activities, enhancing overall production.

Focusing on core activities while saving expenses will help you achieve short- and long-term goals and scale up in the near future.

3. Flexibility and Scalability

Outsourcing offers flexibility and scalability that internal hiring cannot match.

Companies can scale up or down as per the project requirements without the long-term commitments associated with full-time employees.

So, it is beneficial for businesses with fluctuating workloads or seasonal demands.

4. 24/7 Operations

Outsourcing, especially offshoring, enables businesses to take advantage of different time zones, allowing for operations around the clock.

This capability is precious for customer service and technical support functions. Over 60% of companies use offshore service providers to ensure 24/7 operations.