Why Offshoring Fails for Small Companies: A Comprehensive Guide
Outsourcing has become an integral part of every business process that aims to augment its operations with talent that it may not be able to attract or sustain. Current technologies have enabled outsourcing to become more affordable and scalable through offshoring. Offshoring is a business practice that involves moving some or all of a company's processes to a different country. Offshoring can offer many benefits for businesses, such as:
Cost reduction
Due to differences in geographical and, therefore economic, circumstances, offshoring help businesses save on labour, infrastructure, and operational costs by taking advantage of lower wages and taxes in other countries.
Access to talent
Offshoring can help businesses find and hire skilled workers from a more extensive and more diverse pool of candidates, by leveraging the local brand awareness of the offshore company.
Market expansion
Offshoring help businesses enter and serve new markets by leveraging local knowledge, culture, and networks.
However, offshoring is not a one-size-fits-all solution and can pose significant challenges and risks for small companies.
In this three-part guide, we'll explore some of the challenges of offshoring and make recommendations to overcome these challenges:
- Cultural Differences and Communication Barriers
- Legal and Regulatory Issues
- Loss of Control and Innovation
Cultural Differences and Communication Barriers
One of the main offshoring challenges for small companies is dealing with cultural differences and communication barriers between the onshore and offshore teams. These differences can affect collaboration, quality, and customer satisfaction in various ways, such as:
- Misunderstandings: Different languages, accents, idiomatic expressions, gestures, and norms can lead to confusion and errors in communication. For example, a simple word like "yes" can have different meanings depending on the context and tone.
- Mismatches: Different work styles, expectations, values, and preferences can lead to conflicts and frustrations in working together. For example, some cultures may value punctuality, feedback, and individualism more than others.
- Mistakes: Different standards, regulations, and practices can lead to mistakes and defects in delivering products or services. For example, some countries may have different quality control measures, data protection laws, or customer service protocols than others.
These issues can be especially problematic for small companies that may not have the resources or expertise to manage cross-cultural communication effectively. Moreover, small companies may rely more on personal relationships and trust with their customers than large companies. Therefore, any communication breakdown or quality issue can damage their reputation and loyalty.
