The 7 Disadvantages of Offshoring That You Don’t Know and Their Solutions

Offshoring is usually adopted by the companies belonging to industrialized countries to outsource operations overseas, usually the less-developed countries, to reduce the cost of doing business." -Britannica However, offshoring is not all gold; and there are many factors involved that may turn into a nightmare if not considered on time. But thankfully they are not something that cannot be taken care of. That is why I pieced up this article to help you explore the disadvantages of offshoring as well as the ways to overcome them.

The CONS of Offshoring and How to tackle them?

Offshoring comes with many challenges which if not overcome could be a potential threat to your business. So, it is better to have an idea about them before getting your hands dirty with offshoring.
The following are some cons and their solutions to offshoring:

1. Time Zone Differences

Offshoring to countries with different time zones can be a big challenge. As the company not only has to adjust to a new culture but will also have to adjust to new time zones. But imagine how challenging the same situation becomes when offshoring to more than one country, all having different time zones (Philippines, Pakistan, China, and India).
The company would now have to face a 5+ hour difference when organizing meetings for collaboration with offshoring partners. It will become harder to arrange a meeting that can be attended by all offshoring partners. There will be delays in communications, deliverables, and a higher chance of poor collaboration.

SOLUTIONS:

• Find an overlapping working hour to arrange daily meetings.
• Another small, dedicated team can be set to work on making the coordination between the two teams possible.
• If overlapping hours does not exist, then try using a tool for coordination.
• Round-the-clock work is possible, with the in-house and offshoring teams collaborating by continuing each other's work at their own working time.
• The Customer Support department (call centers) might benefit from such a time zone difference.

2. Cultural and Social Differences:

Cultural and social differences are inevitable and cannot be avoided. The company must work toward educating their employees to respect the differences, instead of getting put off by them. The cultural and social differences may appear in the following form:

• Employer-employee relationship,
• Different holidays,
• Body language,
• Sense of Humor etc.

These differences can cause awkwardness and misunderstandings between the teams. The differences might severely affect the project with personal as well as business misunderstandings.

SOLUTIONS:

• Research thoroughly about the offshoring location beforehand, to assess if the differences can be overcome or not.
• Plan occasional events to educate and bridge the gaps between the two teams.
• Celebrate and acknowledge the holidays together.
• Design employee-friendly policies keeping both side's culture and social differences in mind.
• Teach the employees to respect and understand each other's culture.

3. LINGUISTIC DIFFERENCES:

The company might face a communication barrier due to linguistic differences. Even if the other person can speak English quite nicely, there are still chances for the company to face collaboration issues. Even if English is spoken as a second language, still there is no comparison between a person who speaks English as a second language and a Native speaker. Many factors come into play here, but the accent is the top one.

SOLUTIONS:

• Scout the offshore destination beforehand for communication challenges.
• Educate the in-house team about the linguistic difference.
• If the accent is the only problem, and it is posing problems, then maybe organize training sessions to bring it to an acceptable rate.

4. Geopolitical Unrest:

This is quite a crucial factor that needs to be taken into account. There are many countries where everything is ideal, from the talent pool to costs, but due to the country falling to political unrest frequently without any warning there might be some risks involved. It is quite common for developing countries to have political unrest, so the company should be understanding and prepared for it beforehand. Geopolitical unrest might involve:

• Government shutdown
• Military coup
• Election Riots
• Political party's conflicts etc. These faraway issues might become real and affect your business in real-time.

SOLUTIONS:

• Thoroughly research the political situation of the country beforehand.
• If the political unrest is much more than what the company can handle, then it is better not to go offshore until the situation calms down.
• If political unrest happens suddenly, the company should be understanding of the situation.
• A backup plan of remote work should be available and ready to execute wherever and whenever possible.

5. Quality Assurance:

When talking about a product's development, then the topmost issue that arises is quality assurance. Many causes might get past the quality control line, from which some are:
Local production Conditions, Local production Environment, Local production Regulations, Breaks and delays in the local supply chain etc. Even if there are repeated instructions, there is still a bright chance of the deliverable being quite different from the company's expectations. The fault does not lie with the offshore country, but with the differences that were not recognized by the company beforehand.

SOLUTIONS:

A separate team to understand the local administration regulations and business should be formed and dispatched early in the process.
A local guide with local knowledge might be of significant help to the team.
A detailed and easy-to-understand quality assurance check and balance sheet must be prepared beforehand.
A team of quality check-in trained professionals should be dispatched periodically for quality testing. Use the carrot and stick method for penalties on delays and low quality, and award incentives on fast and superior quality delivery.

6. Security and Intellectual Property (IP) Issues

The security risk increases with geographical distance. The leakage of even a bit of sensitive information can cause a company's downfall and maintaining this security becomes, even more, harder when user data is scattered around different offshoring locations.
Usually, companies hesitate on spending any extra capital for acquiring local protection, when this should be the topmost priority of any company. Patent protection is usually country-specific and should be acquired as it will help guard the security of your company's IP.

SOLUTIONS:

Research domestic laws and their violations completely before offshoring any sensitive information. Introduce transparency in your process, by officially releasing data storage information. Acquire all the paperwork to protect your IP before laying out any physical foundation.
Hire a legal advisor to understand IP, data security laws, and regulations. Find trustworthy local partners that can represent you if any issue were to arise abroad.

7. Displacement of Domestic Jobs:

Offshoring does not have much of a positive image but is frowned upon by the locals in most countries as they point it to being the main cause of depleting job opportunities from their home country. Any company planning to offshore should be ready to face a lot of backlashes and if this backlash is not managed properly, it could affect the image of a company quite badly.
If we were to think as a third party, then we will come to acknowledge that this fear from the locals isn't baseless, and catering to locals should be the priority of any business.

SOLUTIONS:

The reasons for offshoring should be clearly explained to the critics and employees. Efforts should be spent on announcing the benefits of offshoring to the public. If the locals get the bad side of the situation, then the situation should be dealt with carefully and the loss of locals should be avoided as much as possible.
Rehabilitation or compensation should be provided to employees if possible, to deal with the repercussions of offshoring.

Does Offshoring Even Have Any Benefits?

After reading all those cons, the first question that comes to mind is if offshoring even has any benefits. Then I can assure you that there are as many benefits to offshoring as there are disadvantages, from which some are as follows:

• Developing countries usually have low production, administrative and operational costs.
• The skilled talent pool at a lower price.
• Most of the recruitment hassle gets off the shoulder.
• Opportunity to explore a new market at a lower cost and greater benefit.
• 24/7 operations possible, if managed smartly.
• Benefit from favorable government policies.

CONCLUSION:

Even though the disadvantages listed will make the company rethink its offshoring decision, but the benefits are worth the risk. However, it is important to know the risks beforehand to be ready to tackle them when they arrive instead of getting panicked and ruining such an excellent opportunity.

This article can be a real eye-opener to all the challenges that an offshoring business might face, and the solutions presented make it clear that there are no problems that cannot be tackled. However, the main thing to keep in mind for offshoring is to do thorough research of the pros and cons beforehand and to welcome the differences with open hands instead of neglecting them.