Outsourcing is a business practice that has become a megatrend in recent years. With its cooperation-based business model of transferring service delivery and product development to remote service providers, outsourcing has empowered startups and small- to mid-sized companies to ramp up production and grow their operations without expending a behemoth amount of resources.
Companies tend to outsource for reasons such as cost-cutting and a lack of available local expertise. This creates a win-win scenario for both foreign businesses seeking staffing solutions and the countries or jurisdictions offering such services, with some places even encouraging the entry of outsourcing activities by crafting laws designed to attract foreign investments.
With a profitable business model, it’s no surprise that outsourcing has made waves in various global industries. The outsourcing market for information technology (IT) services alone, including IT management and development, has reached USD 413.7 billion by the end of 2021. And with the boom of remote work and the ongoing progress of newer industries like business process outsourcing (BPO), the practice of offshoring sees no signs of stopping and is poised to grow even bigger in the years to come.
If you’re looking to outsource a portion of your company’s operations soon, here are some of the countries you should consider if you want to benefit from a highly skilled workforce, reasonable rates, and investor-friendly government regulations.
India remains a top outsourcing destination due to its low cost of living and reputation for offering inexpensive services, particularly in IT and software development. The country is also known for being an outsourcing hub for BPO and other forms of remote customer support.
The average Indian worker earns around USD 424, which is substantially lower than US rates. India is also known for its focus on science, technology, engineering, and mathematics (STEM) education, producing more than 2.6 million graduates from STEM courses every year.
In terms of land mass and population size, the Philippines is a smaller country compared to India. Its outsourcing industry, however, is flourishing just as much as its South Asian counterpart. Like India, the Philippines is known for being an outsourcing hub due to relatively low average salaries and cost of living. Filipino workers are also known for their fluency in the English language as well as their long history of immersion in Western culture, making them valuable workers in the BPO sector.
Foreign companies that choose to establish outsourcing hubs through industrial parks under the Philippine Economic Zone Authority (PEZA) can benefit from government-initiated perks such as tax incentives, long-term land leasing for up to 75 years, and application assistance for visas with multiple-entry privileges.
Most recently, the Philippine government passed the Corporate Recovery and Tax Incentives for Enterprises Act or the CREATE Law to support the economic recovery of businesses following pandemic-related downturns. Under CREATE, qualified businesses can enjoy income tax cuts of up to 20%.
Latin America is a favorable region for outsourcing due to its proximity to the US. And when discussing Latin America, one would be remiss not to mention Argentina. This nation in the southernmost part of South America has a time zone that lies in the middle of European and North American time zones, allowing smooth coordination between teams operating on both sides of the Atlantic.
Aside from lower hiring costs, Argentina is also known for having high English proficiency rates as well as a burgeoning IT industry, making it an attractive option for companies looking to outsource operations overseas.
Poland has one of the largest IT markets for outsourced software services among Eastern European countries. It also has high English proficiency rates and a highly skilled workforce, with the country producing around 80,000 IT graduates per year. Although labor costs for Polish workers are on the pricier end compared to the other outsourcing destinations, rates are still comparatively lower by US, UK, and German standards.
Aside from its stable economy, Poland also has strict data security regulations due to its membership in the European Union (EU). If you choose to outsource in Poland, you can rest assured knowing that your valuable data, including all of your intellectual properties, will stay protected under strict security protocols.
Another Latin American country to consider when outsourcing business processes is Brazil. Like the other countries on this list, Brazil has relatively low average salary rates, a skilled workforce, and an emerging tech industry. Just like the Philippines, Brazil also enjoys a strong position in tech thanks to an abundance of business accelerators and tech parks. And similar to its Southeast Asian counterpart, Brazil also has outsourcing laws that favor foreign investors.
Making Informed Outsourcing Decisions in a Changing World
Choosing a destination for outsourcing your business operations requires a lot of thoughtful planning. You need to have enough foresight to make sure that all aspects of a country—from its government to its culture—will have a positive impact on your critical business decisions. But regardless of whether you choose a neighboring country or one on the other side of the world, having a well-informed outsourcing strategy is the key to ensuring the success of your venture in 2022 and the years to come.