Guidelines on Remote Location Outsourcing

Guidelines on Remote Location Outsourcing

If you’ve been thinking about remote location outsourcing, you are not alone. Many companies around the world are shifting toward remote location outsourcing as a way to cope up with the unpredictability of the global business environment. If you want proof, all you need to do is watch the news on TV or read the business section.

Remote location outsourcing means delegating or transferring select services to another region where comparative cost advantages and economies of scale exist. Foremost of these cost advantages is labor.

If you are a company based in Australia, it will cost you AUS$18 per hour to hire a Full Time Employee or FTE. Factor in benefits, incremental cost of rent, Internet and contingencies and the average cost of an FTE will easily hit AUS$ 27 per hour.

If you were to outsource those services to a similarly skilled worker in the Philippines, it will only cost you AUS$ 12 to AUS$ 16 per hour inclusive of benefits, rent, Internet and other utilities. Assuming cost of labor accounts for 30% of revenues, then the estimated operating cost per hour Australia is AUS$ 90.

Thus, by outsourcing to the Philippines you save up approximately 87% on your cost of operations. It may not be that simple but definitely, outsourcing services to a remote location will reduce your cost of business.

But outsourcing to a place like the Philippines or other premiere destinations such as India, China and Brazil can be a complicated process. If you plan to outsource to a remote location, here are some guidelines to keep in mind:

  • Research about outsourcing. Prepare a market study and distribute it among your team members. In addition to online research, interview companies that have outsourced services.
  • Study the culture. Learn everything that you can about a region’s culture; their history, language, practices and traditions. Develop an understanding on how their values and their belief systems.
  • Reach out to regulating agencies. Create a short-list of prospective outsourcing services providers by contacting local regulating agencies. Find out which companies are in good standing then conduct due diligence.
  • Schedule a visit to the region. If your budget should allow it, plan a visit to the region. Contact representatives from your short list of candidates so they can assist you and give a presentation of their services. You can check the current state of infrastructure in the region and immerse in its culture.
  • Moderate expectations. When visit a region which presents significant comparative cost advantages do not expect much in terms of infrastructure. There is always a trade off when costs are lower.

In the case of the Philippines, its Internet services have been among the slowest in the world. Yet, companies continue to outsource to the Philippines because of lower overall cost and high quality of work.

The beauty of having a global economy is that it allows businesses to find opportunities in other regions. Outsourcing bridges distances across oceans without generating significant costs and still render excellent quality of work. But you have to know what you are getting yourself into when outsourcing to remote locations.

Posted in Blog, outsourcing.

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