Your Comprehensive Guide to Outsourcing in Offshore Locations

Offshore outsourcing is a feasible strategy for resolving talent and skills shortages cost-effectively. But where should you begin, and how can you make it work? Here's a guide to help you get started. 

In this article: 

• Learn the definition of offshore outsourcing 

• Guide to outsourcing in offshore locations 

1. Planning and preparation

2. Choosing a service provider 

3. Managing your offshore team

• Build your offshore accounting team

What is offshore outsourcing?

Offshore outsourcing is the practice of hiring external service providers from another country. You can usually find offshore outsourcing companies in countries outside your geographical region or in places with different time zones from your home country. 

An example of offshore outsourcing is when you're from the United States and you outsource certain tasks to the Philippines. 

Note that outsourcing, by itself, is simply about the business activity of delegating tasks that you can do onshore, nearshore, or offshore. To get a clearer picture of their differences, check out the table below.

Read Next: Understanding the Different Types of Outsourcing Models 

The services you can outsource depend entirely on your needs. It can range from basic and administrative tasks to specialized and expert-level functions. 

But of course, offshore outsourcing is just like any business activity. To succeed in this initiative, you need enough planning and preparation. Deciding where to outsource is also essential because it has direct correlations with cost, service quality, and client experience you'll receive throughout the engagement. 

Guide to outsourcing in offshore locations

From the three types of location-based outsourcing models, offshoring promises to deliver the most cost-effective business solutions.  

The price differences in services between outsourcing destinations are often the result of their varying cost of living. Developing countries like the Philippines (offshore), for instance, have lower labor and operational costs compared to first-world countries like the U.S. (onshore). Because of this, you're able to outsource services of the same quality for a lower cost. 

However, the location alone does not give you a 100% outsourcing success rate. While your choice of location can help you cut costs, you still need to make the necessary preparations and decisions before you start an outsourcing engagement. By doing so, you can find the right offshore outsourcing company that aligns with your goals and requirements. 

To help you get started, check out the offshore outsourcing guide below. This guide is divided into three sections — planning and preparation, choosing a provider, and managing your offshore team — to assist you at whatever stage you are in your outsourcing journey. 

1. Planning and preparation

Before you outsource, it’s essential to have a deep understanding of your business needs, the reasons why you need to outsource, and how you plan to integrate outsourcing into your existing strategies. 

a. Identify your business needs

Conduct a holistic assessment of your business to identify areas you can outsource. Look into its current capabilities, challenges, and goals. From there, determine which gaps can be resolved by outsourcing.

If you’re managing an audit firm, for example, you may observe a limitation on your firm’s capacity to accept more projects during the busy season. With this information, you can decide if you want to accommodate more clients and if it’s smart to outsource seasonal audit support. 

b. Define your requirements

Once you have decided to push through outsourcing, list down your service requirements. This includes the functions you plan to outsource, the headcount and qualifications of your outsourced staff, software or tools needed, project duration, and other non-negotiables. Doing this can help streamline your process of sifting through different service providers.

c. Set your goals and objectives 

Figure out what you want to achieve by outsourcing. By knowing your goals and objectives, setting realistic expectations and metrics to gauge your outsourced team’s performance can be easier. You can also use this as a reference to see if your outsourcing initiative is successful or not. 

d. Prepare an outsourcing plan

After knowing your goals, make sure to create an outsourcing plan. Some of the items you can include are your: 

• eligibility requirements for service providers,  
• outsourcing risk mitigation strategies,  
• main contact person, 
• preferred communication methods, and  
• payment plans, among others. 

e. Choose an outsourcing destination

This step can be optional, especially when you prefer to compare service providers from different outsourcing destinations. However, it’s also a good idea to identify a country or two. This way, your sourcing process can be more streamlined instead of scattered. 

If you plan to outsource to a specific country, some of the factors you must consider are the following: 

• Quality of employees 
• Economic condition 
• English proficiency 
• Cultural compatibility 

• Ease of doing business 

Knowing these factors is necessary since they can have long-term impacts on the cost, quality, and effectiveness of your outsourced functions. 

You might be interested: Outsourcing to the Philippines: Benefits & Tips to Consider 

2. Choosing a service provider

Once you have a concrete outsourcing strategy, it’s time to start finding and selecting a suitable service provider that can properly implement it. Here are some ways to do this. 

a. Shortlist potential service providers

Come up with a list of service providers you can potentially work with. To make this process more efficient, you can: 

• Ask your network with previous or ongoing outsourcing engagements for referrals 
• Get quotes from active outsourcing directories 
• Join networking events and connect with representatives from outsourcing companies 

You can also do a manual online search, though it can be tedious and time-consuming on your end. 

b. Send a request for proposal (RFP)

To identify which of your shortlisted providers have the most favorable terms, you can send them a request for proposal. By doing so, you can implement a more standardized and rational method of evaluating bids. 

c. Talk with your prospects

Take the time to meet with your prospective service providers, even virtually. Arranging a meeting is an effective way to learn more about the company, discuss your requirements, and ask specific questions about your prospect's ability to meet your needs. You can also use this as a way to filter out unresponsive providers. 

If you can, we also recommend making an on-site visit since it can give you more idea about their culture and work atmosphere. 

d. Do your due diligence

Conducting due diligence is also important since it lets you investigate further your chosen provider’s legitimacy and credibility.

Here are some of the key areas you may want to look into: 

• Compliance with data protection laws and other relevant regulatory requirements 
• Business continuity plans 
• Portfolio of previous projects 
• Legal agreements and contract obligations 
• Financial standing 

After gathering enough information, take the time to select the service provider with the most favorable reviews, reasonable pricing, and quality of service delivery. 

3. Managing your offshore team

Aside from choosing a suitable service provider, the way you manage your offshore team can also influence the success of your outsourcing engagement. Effective outsourcing governance is necessary to secure positive outcomes. 

To make outsourcing work for you, consider these best practices. 

a. Set SMART expectations

Inform your offshore team about your expectations based on the outsourcing goals you have identified at the beginning of the process. Make sure that these expectations are SMART (specific, measurable, attainable, relevant, and time-based) to help your team get on board with your business more easily.

b. Understand the limitations of your outsourcing engagement

Outsourcing also has its limitations and challenges. To minimize its potential impacts on your organization, you must be familiar with the drawbacks you might encounter along the way and the appropriate actions you need to take. 

Read Next: 7 Common Challenges of Outsourcing Accounting Services + Solutions 

c. Maintain regular and open communication 

Distance and time zone differences can cause friction in your outsourcing engagement. Thus, it's crucial to maintain regular communication with your offshore team. Doing so will not only prevent misunderstandings but also unnecessary delays. 

d. Measure your offshore team’s performance

You should also set key performance indicators (KPIs) to measure your team’s performance. Aside from knowing if your engagement is heading in the right direction, it also informs your team of the key areas they need to focus on and the quality of work you expect from them. 

e. Evaluate the effectiveness of your engagement

Set aside time to review your ongoing outsourcing engagement. When doing this, make sure to evaluate its effectiveness and alignment with your business goals. It's also a good opportunity to identify areas for improvement.

If you notice any shortcomings at the end of your service provider, communicate it with your contact person and observe how they will resolve those concerns. Remember, a good offshore company provides excellent client experience through regular quality checks and corrective action methodologies. 

Build your offshore accounting team

Are you looking for a credible offshoring partner that can support your business operations? Consider working with D&V Philippines.  

For over 10 years, we have been working with professional services firms — providing them with qualified accounting professionals and increasing their ability to scale. We also have intensive quality control procedures for the continuous standardization and improvement of our service delivery. 

If you’re interested in learning more about our services, contact our team today.  

You may also download our free guide, Outsourcing: How to Make it Work, to know how we can help in achieving your company’s goals.