Offshore, evolved: Five reasons managed operations are the new outsourcing

There are usually two options when a firm considers setting up operations outside Australia; outsource the work or go offshore by themselves.

While the primary reason for going offshore has been to cut costs, companies are now also looking at these strategies to gain access to talent they cannot easily find or retain at home or to optimize their flexibility and scalability.

Let's start with outsourcing. While the easier of the two, outsourcing is not without risks. These include the potential to lose intellectual property, increasingly tight government and industry regulation - both local and abroad - and the need to ensure the quality of the work that is being offshored.

Where outsourcing is deemed too risky or not suitable, incorporating or starting an offshore subsidiary is the other option. While this approach ensures operational control, it does present a different set of dilemmas; higher up-front capital costs, longer time frames and the need to navigate unfamiliar local legislation and cultural differences to name a few.

Companies must continuously sharpen productivity and efficiency to survive and grow. The offshore outsourcing vs. offshore incorporating debate is one of the most pressing challenges for business leaders looking to respond to the challenges and opportunities presented by rapid globalisation.

Unbeknown to many company leaders, there is a third option which sits right in between outsourcing and offshoring. This solution combines the ease of outsourcing with the control of incorporating.

Here are five reasons why senior management should consider a managed operations approach as an optimized way of starting offshore operations:

• Control – Managed operations mitigates the risk associated with outsourcing critical information and gives you quality control without investing in a whole new department for a specific job.
• Growth through talent – Rather than getting what you’re given with outsourcing, with managed operations you have control over the talent you bring on board.
• A culture of success – The biggest concern most have when outsourcing to non-English speaking countries is communication skills. Managed operations allow you to control the training staff receive and align the office culture more closely with your own.
• Scalability – Investing in an overseas office is a huge commitment and once selected, you’re stuck with what you choose. Managed operations allows you to start small and expand later if you need more staff and space.
• Lower costs, better focus – Investing in affordable staff overseas allows you to reinvest savings in other areas to improve your core business.

Taking the perfect middle ground between traditional offshore outsourcing and incorporating, managed operations is helping many firms take control over their costs, deliver flexibility and enable long-term growth in an easy and accessible way.

And for any firm looking to establish an offshore shared services centre, that’s a truly exciting prospect.

Click here for more information and to download the Salmat White Paper on Managed Operations.