Based upon a review of the literature, remote work may have overtaken offshoring as the favored cost reduction strategy. Theoretically, assigning job tasks, projects and business processes to be carried out remoted, could dull the shine of the need to offshore by conglomerates. These large multinational companies strive to realize significant growth and dramatic reductions in costs simultaneously through the use of offshoring. How could this be so?
Related articles you might like:
The environmental conditions ushered in by the pandemic made the realization of the true costs and risks associated with offshoring more glaring. Further, governmental mandates of lockdowns and public facilities closures made possible the remote provision of goods and services. All of a sudden services, goods and products supplied from another location and/or virtually seemed to be much less daunting. In fact, it is now a fabric of society.
We all know the benefits of remote work and remote job task completion. Let’s talk about offshoring and the factors that facilitate the decision by major corporations to offshore.
The Early Promise of Cost Reduction by Offshoring
Based upon these findings, Price Waterhouse Cooper opines that the promise of reduced costs in comparison to producing a service or good in-house is not the driving factor culminating to the decision to outsource. The advisory firm indicated that there were other factors leading to the growth in outsourcing.
They were involving the promise of:
- greater product and service quality
- enhanced support of rapid growth in the industry
- faster speed with which to bring new products and services to market, and
- advanced innovation and creativity.
In light of these promises, other experts cited in the report worried that organizational cohesiveness and the inability to build an internal ‘backbench’ of knowledge has the unintended effect of leading companies who rely upon outsourcing into a ‘death spiral.’
Not for naught, however, Price Waterhouse Cooper was quick to lay aside the ominous foreboding of many of the naysayers of outsourcing. They pointed to statistics demonstrating that companies who choose to offshore are obtaining about a 30% to 40% growth in revenue every quarter.
Almost 15 years ago, in January 2007, the respondents of the CEO Survey replied that on average, “they gain major competitive advantages from outsourcing.” These competitive advantages aside, they understood also the complexity of offshoring and were still seeking methods for reducing transaction costs as well as lowering the risk associated with early contract terminations.
BMA Global analyzed the 2021 outsourcing market and identified the following tasks most conducive for outsourcing:
- Information Technology
- Administrative Services
- Accounting and Finance
- Sales and Marketing
- Human Resources
- Legal Services
- Customer Support
- Tax Preparation
- Computer Programming
- Shipping and Logistics
- Web Design
- Healthcare Services Engineering
Offshoring Trends: Opportunities for Remote Work and Remote Businesses
Based upon current offshoring trends, opportunities are abundant for remote service providers, businesses, remote workers and freelancers, gig workers in search of remote job tasks for which to bid. For instance, BMA Global projects that offshoring trends this year (2022) that will impact businesses moving forward in the following ways:
- Incorporating digital offshoring technology such chatbots (robotic process automation), artificial intelligence, cloud computing, cloud storage, and cyber security into longstanding business models,
- Establishing collaborative partnerships and joint ventures as a hedge and protection against work stoppage due to natural disasters and bottlenecks in international supply chains for instance,
- Focusing on cost reduction initiatives due to the uncertainty in the global marketplace. Rising inflation, shortage of labor, and rising customer expectations of product and service quality as well as availability and access come to mind.
- Taking into account transportation, fuel costs and higher risks to preferring nearshore (national, regional, local) sources of offshoring rather than typical far-range offshoring.
- Factoring agility, flexibility and adaptability into the decision-making model so that the alternative that promises a high rate of cost reduction is not selected without the consideration of possible and/or foreseeable risks.
Based upon current offshoring trends, opportunities are abundant for remote service providers, businesses, remote workers and freelancers, gig workers in search of remote job tasks for which to bid.
Offshoring Trends: Implications for Remote Work
These trends are favorable for the worker working from home, working from anywhere, the remote worker, gig and freelance workers completing remote job tasks, and the small business looking to pick up new clients. Why?
Other articles you might like:
- Why coworking is a good choice for hybrid work models
- What HR must know about GDPR
- Payroll and Tax for Remote Workers
- The essential steps to writing a remote work policy
Because corporations large and small are recognizing the benefits associated with an agile workforce and supplier pool. The pandemic brought about environmental conditions of mandated lockdowns, shortages of labor, highly fickle consumers, changes in consumer behaviors, restricted local, regional, national and international travel, global political upheavals, and threats to changes in trade tariffs and rising sanctions.
The number one concern of businesses is financial solvency.
Remote Work Fosters Agility and Business Survival
The ability to ‘turn on a dime’ is vital to survival. Remote work is an essential concept connected to agility, nimbleness and adaptability. Larger, less spry corporations, in spite of a long history of offshoring may have found out the hard way.
The American Bar Association presented statistics prepared by economists. These economists analyzed the rate of bankruptcy filings during 2020. They found that bankruptcy filing by corporations with assets larger than $50 million increased by nearly 200% in 2020. On the other hand, family households, small and mid-sized businesses were less likely to file for bankruptcy in 2020.
Another article you might like:
Smaller companies perhaps, as more frequent users of remote worker and contingent worker platforms like UpWork and Freelancer for the completion of remote job tasks, may have reduced their debt or ‘obligations load.’ They may have also relied upon their own sourced network of subcontractors and consultants tele-commuting and thereby responded faster to the rapidly deteriorating environmental conditions. Lowered debt obligations, absence of lease and employee agreements may have lessened the immediate financial fallout of the pandemic crisis.
As we may see, cost reduction through offshoring and cost reduction through remote work are not one in the same.
Cost Reduction and Offshoring
In 2020, reducing costs represented the #1 reason employers outsourced. Deloitte’s 2020 Global Outsourcing Survey found that 70% of the employers participating in its survey said cost reduction was their primary aim and rationale for outsourcing good and services.
These findings remain unchanged through the years. Regardless of the time in which the survey was conducted, the environmental and economic conditions faced by employers or the consulting firm. In most instances, cost was the driver of offshoring behavior.
Price Waterhouse Cooper prepared a report titled, “Outsourcing comes of age.” The consultants surveyed 226 customers of outsourcing firms and 66 firms who provide outsourcing services in the spring 2007. The premise of the report is that outsourcing, while used to expand into new product lines, lower costs associated with producing a product and providing a service; disadvantages remain.
Offshore Contract Ended due to Increased Costs
While the promise of cost savings caused corporations to salivate at the suggestion of offshoring, the promise may not have been fully realized in a number of instances. For instance, Price Waterhouse Cooper cited the number one problem is that, most deals fall through prior to the pre-planned contract termination date, due to:
- increasing costs, and
- growing mistrust between the two contract participants (the client vs the service provider or producer.
Conclusion: Opportunities for Remote Work and Remote Businesses
So this point gets back to our earlier discussion about the abudance of remote work opportunities for remote first businesses, freelancers and gig workers working virtually to bid upon and complete remote job tasks and projects.
Hop to it!