By Neil Kinson, Chief of Staff, Redwood Software
Over the last couple of decades, offshoring became a core part of businesses across a huge range of industries, from engineering to customer service and the back office.
Driven by the need to remain cost-competitive, it often seemed like the logical decision for many decision makers. Costs are rising? Move the work to where the cost of materials and/or labor are lower. Simple.
But while offshoring can lower costs for some companies it’s a practice that can also lead to compound issues across a business if a third-party service provider doesn’t keep in sync and deliver on schedule. Few business processes, in any, operate in a silo.
The compounding problems of offshoring
Once you set aside the problem of delivering of business critical processes from teams thousands of miles away, there are other reasons the clock is ticking for traditional offshoring solutions.
With the rising cost of overseas labor comes the pressure to find the next cheapest location – this perpetuates a cycle of increasing costs and negates much of the aim of outsourcing back office functions in the first place.
Wages in China, for example, rose from around $3,800 to $10,500 between 2007 and 2017. It’s not just rising costs though.
Some businesses have also found that outsourcing certain processes - whether that’s the IT department, HR or back office - can’t live up to expectation for the rapid, high quality and accurate task delivery needed to remain competitive.
Add in that offshoring processes to a third-party brings inherent audit and regulatory complications and it can quickly become a potentially unappealing prospect.
In 2016, a study by the Ponemon Institute found that 58 percent of respondents from a range of different industries admitted that they don’t know whether the security policies of the companies that perform outsourced services were sufficient to prevent a data breach. With stats like that, bottom-line benefit can easily be outweighed by the potential for disaster.
The rise of Cybershoring doesn’t have to be the end for offshoring
The imminent threat to offshore service providers isn’t just the reduction of cost and labor arbitrage benefits, it’s the rise of robotic process automation and the ability to improve productivity, accuracy and regulatory compliance without increasing the overall cost of delivering those processes. This is what is referred to as Cybershoring a term used to describe the services required to get organizations from their current inefficient state, to a robotic process environment.
India, to take just one example, is a country where rising wages and volatile geopolitics pose a threat to its $150 billion outsourcing industry, but perhaps not more so than falling further behind in its automation abilities.
However, it’s this very shift that lets companies to improve efficiency and reduce headcount costs. It’s location-agnostic offshoring driven by technology that replaces repetitive, manual processes with highly automated, compliant processes that keep the core business in complete control.
As the ability to replace repetitive processes is open to anyone, it doesn’t need to be the end of offshoring as a whole, but there’s a huge shift already underway.
If we level the playing field through technology, nearshore, onshore and offshore business units increasingly have the ability to automate the majority of their mundane but critical process, and spend more time focusing on strategic innovation.
Get in touch with Redwood to find out more.