Offshoring Done Right: Right Skills in the Right Locations at the Right Price
Hatfield Advisory provides industry-based insights and expertise in determining the best opportunities for our clients to unleash significant value and savings when exploring offshoring and outsourcing opportunities.
The biggest pitfall when considering offshoring opportunities is basing the value proposition almost exclusively on labor rate arbitrage. The value of offshoring work to lower-cost labor markets entails so much more than assessing the cost of resources in one location versus another. It requires detailed labor market studies to understand skills availability, labor market supply and demand dynamics, geopolitical stability, government incentives and so much more. Beyond assessing labor rate arbitrage opportunities, it is important for companies to factor in labor productivity, taking into account business domain knowledge, language barriers, cultural differences, time zone and communication challenges.
With the advent of artificial intelligence (AI) and machine learning (ML), technology is a significant disruptor to traditional offshoring and outsourcing solutions and needs to be carefully considered when establishing related strategies. It is also important to determine which labor markets best suit various business requirements in terms of onshoring, near-shoring and offshoring solutions. Eastern Europe labor markets are very different from India, which are very different from China and the Philippines, which in turn are exceptionally different to Mexico and Latin America. Critical thinking needs to be applied to intellectual/knowledge capital retention requirements and business competitive advantage when outsourcing and offshoring work.