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Offshoring – the benefits and pitfalls SMEs need to know about

Angela Vidler
21 June 2016 4 minute readShare
Angela Vidler, Diversify

Big businesses have long been taking advantage of offshore process outsourcing. Smart SMEs can learn from the big guys and benefit from creating offshore teams.

There are two big challenges for any SME in recruiting an offshore team.

The first is to recognise that employing staff overseas is a sensible part of a sustainable SME growth strategy. The second is to make it work.

Modern offshoring is not about farming out process-oriented functions; it’s about investing in the most productive parts of your business and boosting your labour force to better serve customers.

Choosing to recruit staff in a location such as the Philippines, a country with excellent English-language and business skills in an Australia-friendly time zone, should be part of a broader growth strategy aimed at moving resources to the areas of your business that actually generate revenue.

Why consider offshoring?

  1. Offshoring is more about up-skilling than cost-cutting. In our experience, clients tend to maintain or increase their Australian staff, but are able to upskill local employees so they become more valuable to the organisation.
  2. Offshoring processes, procedures and labour-intensive work allows businesses to put more resources into fee- or growth-generating initiatives. For example, one of our clients employed a chartered accountant who had to perform menial data-processing tasks and account-entry functions. By offshoring this component, the accountant was able to spend more time with upper management on growing the business, they were upskilled in the latest industry software and had time to be more active in modelling and forecasting company growth.
  3. Smaller enterprises and start-ups can access roles they otherwise could not afford early in their growth cycle, allowing them to grow quickly. One client, a technology start-up, was unable to locally hire the coding talent they required, so their head developer and other key staff were performing basic tasks and functions rather than taking charge of the project’s strategic side. Our Philippines office helped them recruit highly skilled developers, so local staff were able to focus on the bigger picture. Without offshore labour, the start-up would have been incredibly slow to market. Now they’re able to grow and, as a result, may be able to begin employing local staff more quickly.
  4. Offshoring process-oriented work provides the opportunity to enhance scope and capability, freeing up funds to hire extra talent with unique skillsets. Offshoring is flexible and allows businesses to better and more cost-effectively handle capacity. We’ve been working with a project management company that had senior project managers performing basic CAD tasks. By offshoring process-oriented CAD work, they were able to deliver more value to clients and service them more effectively.

Offshoring pitfalls to avoid

Finance, digital marketing, graphic design and app and web development are among the more common functions offshored to the Philippines. These are across many industries, including retail, manufacturing, construction and professional services.

In our experience working across all industries, here are six key pitfalls SMEs need to avoid:

  1. Set and forget? Forget it!

Local managers need to fully direct their offshore teams to get the most from them, just as if those staff were operating down the hall. Businesses that prioritise briefing, engagement and the job satisfaction and upskilling of their employees in the Philippines are far more likely to succeed.

  1. Negotiating foreign business conditions

It’s an acquired skill to quickly establish a well-qualified offshore workforce in their own offices, equipped with excellent communication and data facilities. The same goes for negotiating local labour laws and understanding cultural differences. SMEs that succeed in offshoring routinely engage experts to work alongside them.

  1. Managing change

Any change can raise anxiety among employees. Communicating with local staff about the overall growth strategy of the business and the role that offshoring will play is not just good management, it’s an opportunity to re-engage employees with the future direction of the company.

  1. Cultural misunderstandings

Clear and effective communication is a key element to successful offshoring. While the Philippines has a 94 per cent English literacy rate and direct exposure to Western culture, there are subtle differences that local staff will need to be aware of so misunderstandings do not occur. Best-practice offshoring providers will offer induction programs for all staff – Filipino and Australian – to make sure teams start with a firm footing and mutual understanding. We find that concentrating on clear communication also has positive flow-on effects within businesses’ Australian operations.

  1. Data security and intellectual property

In a borderless digital word, data security should be a priority for all businesses, not just those with offshore teams. A data security and location plan should be developed, covering where data will be stored, levels of access, physical security measures within the facilities, contractual arrangements and the consequences of data theft. We recommend companies have all staff (in Australia and offshore) sign a Deed of Confidentiality and an Assignment of Intellectual Property.

  1. There’s no magic bullet

It is important to manage expectations during the rollout of the offshoring plan. With careful planning in the establishment phase, the rewards of moving a business up to the next level – far quicker than would otherwise have been possible – can be substantial. By setting achievable time-frames and deliverables, staff will soon see the benefits of the decision. 

For all sizes of business, a global workforce is the way of the future and offshoring is a part of this process. For SMEs, by recruiting staff in a lower-cost environment to undertake process-orientated work, capital is freed up for the business to invest in the parts of the operation that generate revenue.

Angela Vidler is the CEO of Diversify, an Australian-owned company with offices in Australia and the Philippines that focuses on offshoring staff.

Offshoring – the benefits and pitfalls SMEs need to know about
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Angela Vidler

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