Global outsourcing is a strategic move for businesses to access skilled talent worldwide and scale up and down their operations flexibly. It is a fast-growing trend helping companies to gain a competitive edge over competitors in a global marketplace.

Apart from saving costs, global employment outsourcing allows companies to get the right talents regardless of location or timezone. Moreover, it helps businesses expand to new geographic markets without setting up physical and legal offices.

Read on to learn why global employee outsourcing is important for businesses and how it helps them gain market share.

What is global outsourcing?

Global outsourcing is the practice of hiring employees or partnering with a company from another country to perform business operations in that country. This arrangement allows companies to start operations in a different county without setting up physical offices. While improving operational efficiency, this allows companies to stay compliant to local employment laws.

Why businesses exercise global outsourcing today

Multinational companies are no longer turning to outsourcing measures to replace their own in-house employees just for lower costs. Instead, outsourcing has taken the form of strategic partnerships with businesses trying to fill skill gaps within the company. This approach adds value, streamlines business processes, maximizes output, and ultimately, helps in boosting market share.

A deeper look at the reasons why businesses pursue global outsourcing today reveal the changing strategic preferences among business executives and owners.

Cut costs

While cost cutting is not the only reason for outsourcing, it is still undoubtedly a crucial reason. Outsourcing certain operations or skills to other global countries, companies can access specialized talent or service providers at lower labor costs. This is a straight calculation to save money.

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Furthermore, turning to global outsourcing lets companies reduce investments in office infrastructure, technology, hiring and training, and other overhead costs. In fact, the global outsourcing partner company handles all these aspects while the client company focuses on core business processes.

Scale operations

Global outsourcing allows companies to scale their operations quickly and efficiently. By outsourcing employees from other countries, they can quickly set up a functional team and straightway dive into operations. 

Furthermore, companies can get specialized knowledge intensive tasks done by adapting knowledge process outsourcing. This allows them to easily expand their capacity without investing heavily in new infrastructure or workforce. 

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Similarly, businesses that witness seasonal demand reduction can scale down operations by putting a temporary pause to the outsourcing contract.

Fill skill gaps

Around half of over 500 business executives have accepted in a global survey that talent acquisition is a top concern for them. Going further, 56% of executives surveyed admit the lack of right mechanisms to retain top talent.

This shows how critical talent acquisition is for business executives. However, GEO (Global Employment Outsourcing) is an effective measure to fill the skill gaps. GEO opens the door for companies to hire talent pools worldwide. Organizations can build distributed workforces across cross-border jurisdictions. It allows companies to get the right people for the right jobs at right prices.

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Global employment outsourcing is an effective way to acquire and retain global talents and flexibly build high-quality teams to achieve long-term goals.

Resource reallocation

Outsourcing non-core tasks to an offshore team at lower costs, companies save millions which they can reallocate to other core business operations. For example, when a business hires an external agency for market research rather than hiring a dedicated in-house team, it can save costs when there is low to no requirement for the market research activities. Moreover, the external agency will provide better results as their core task is to conduct market research.

Customer base diversification

As discussed, global outsourcing allows companies to set up operation centers at foreign countries quickly whenever the business demands grow. This is critical to expand businesses in regions where demands peak. In short, companies can quickly expand beyond their traditional markets.

Challenges in adopting global outsourcing

Adopting global outsourcing has its own challenges too. Consider the following challenges that every company must address before looking for global outsourcing.

Limited control

Firstly, GEO or global employment outsourcing limits the control a company can have over the employees it hires. Since the legal authority remains with the GEO provider, client companies may have restricted authority over termination decisions and the implementation of employment policies. Moreover, the shift in control can pose a challenge to organizational standards for the hiring companies.

Data security

Data security is another challenge. Outsourcing often requires companies to trust external service providers with sensitive company data. Furthermore, sharing of data across networks and borders could lead to cyber attacks and data breaches.

FAQs

What is the difference between global outsourcing and offshoring?

Global outsourcing involves contracting business functions to external providers worldwide, while offshoring specifically relocates operations to a foreign country, typically for cost savings. Offshoring is a subset of global outsourcing, but not all global outsourcing involves offshoring. The key distinction lies in the geographical aspect and the nature of the business relationship.

What are some examples of global outsourcing?

Common examples of global outsourcing include 

• IT services (software development and technical support)
• BPO services
• Data entry services
• Product and Component manufacturing 
• Professional services (accounting, legal work, and human resources)
• KPO (market research, data analysis, business consulting)

Who benefits from global outsourcing?

Global outsourcing creates a win-win situation for all the stakeholders involved. Companies outsourcing the services benefit from cost savings, access to specialized skills, and increased flexibility. At the same time, the outsourced agencies create employment opportunities and offer exposure to international business practices.

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