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About 68% of US companies engage in offshore outsourcing today.
And when we say companies, we’re also talking about multinational, successful businesses. The brands that we know and love. Top brands like Adidas, Google, Telstra, and Amazon outsource their operations to companies like KDCI because of benefits such as cost efficiency, access to a wider, global talent pool, and staffing flexibility.
That’s how much offshore outsourcing impacts the business world. With the right outsourcing partner, you can tap into this impact and empower your business to scale smarter with an outsourced team, too.
So, let’s talk about it! In this blog, we’ll answer the questions “what is offshore outsourcing?” and “how does it actually work?” We’ll also cover the key benefits of having an offshore team as well as the best practices in finding a reliable offshore outsourcing partner.
Here’s everything you need to know.
What Is Offshore Outsourcing?
Offshore outsourcing is a business strategy wherein companies hire external firms or a third party service provider in other countries to handle tasks like customer service, IT support, software development, and manufacturing. It could mean having a handful of staff working for you from across the globe, or a dedicated team for the function you are outsourcing, say an entire HR department operating from offshore destinations like the Philippines, serving as an extension of your in-house team.
This allows businesses to save costs and access specialized skills that are more readily available or more cost effective abroad. As opposed to onshore outsourcing, an offshore outsourcing service allows businesses to leverage lower labor costs from outsourcing providers, giving them both reliable workers and substantial cost savings. That’s a win-win!
The tasks outsourced depend on the company’s unique operational and business needs, such as a tech firm hiring foreign developers for their expertise or a manufacturer seeking lower labor costs or an eCommerce company needing more customer service agents. Since the global BPO market has grown and evolved over the years, almost every service can now be outsourced. The test? If a task can be done remotely, then you can delegate it to an offshore team.
What Are The Different Types Of Offshore Outsourcing?
Offshore outsourcing services can be broadly classified into five types, each catering to different operational needs and strategic objectives of businesses.
1. Information Technology (IT) Outsourcing
More popularly known as ITO or IT Outsourcing, this type of offshore outsourcing involves contracting external organizations located in other countries to handle various technical support and IT-related tasks, such as software development, application maintenance, network management, and IT support. It’s one of the most common forms of offshore outsourcing, driven by the need for technical expertise and cost savings.
Curious about IT Outsourcing? Check out ITO Meaning: Benefits and Use Cases of IT Outsourcing.
2. Business Process Outsourcing (BPO)
Business Process Outsourcing (BPO) entails outsourcing non-primary business activities and functions such as customer support, administrative tasks, human resources, finance and accounting, and data entry to specialized service providers overseas. The aim is to improve operational efficiency and allow companies to concentrate on their core competencies.
3. Knowledge Process Outsourcing (KPO)
Knowledge Process Outsourcing extends beyond traditional BPO by outsourcing more complex, knowledge-intensive tasks that require specialized skills (that, of course, still come at a lower cost). This includes research and development, financial analysis, advanced engineering services, legal processes, and consultancy services.
Learn more about the difference between BPO vs. KPO here: BPO vs KPO Explained: Essential Insights You Should Know.
4. Legal Process Outsourcing (LPO)
Legal Process Outsourcing focuses on outsourcing legal services to external firms located in jurisdictions with lower labor costs. Services commonly outsourced include document review and management, legal research, contract management, and compliance services.
This type of offshore outsourcing service is typically used by legal forms or large corporations with their own legal departments who need to fill some roles while reducing the overhead costs of recruiting and training legal staff.
If you want to know more about LPO, read: LPO: A Comprehensive Guide.
5. Manufacturing Outsourcing
This offshore outsourcing type involves contracting manufacturing processes or production tasks to foreign companies. Manufacturing outsourcing is adopted by companies looking to benefit from lower labor and as well as production and operational costs, access to advanced manufacturing technologies, and the ability to scale production based on demand without significant capital investment.
How Does Offshore Outsourcing Work?
Offshore outsourcing follows a structured process that allows companies to delegate certain tasks or business functions to third-party service providers located in countries other than where the company is.
While there is no one-size-fits-all approach and the journey may vary depending on your outsourcing needs as well as the nature of your chosen provider, the process typically involves the following key steps:
Step 1: Identifying Offshore Outsourcing Needs
Companies first need to identify the tasks they want to outsource. These can range from IT services, customer support, and manufacturing, to specialized tasks or short-term projects like legal processing or knowledge-based work, depending on every specific business need.
Step 2: Selecting an Offshore Outsourcing Provider
The next step involves researching and selecting the best offshore outsourcing companies with the expertise, resources, and capacity to meet the company's needs. This selection is based on various factors, including cost, reputation, quality of work, tech innovation, and the provider's ability to communicate effectively across cultural and linguistic barriers.
Usually, companies from developed nations and economies outsource to developing countries like the Philippines to maximize cost savings. This strategy leverages lower labor costs and access to a skilled workforce, allowing businesses to reduce expenses and improve efficiency with a trusted BPO company.
Step 3: Due Diligence and Negotiation
Companies conduct due diligence to assess the capabilities, financial stability, and track record of the chosen offshore outsourcing company. Following due diligence, the company negotiates terms, including scope of work, engagement models or service level agreements (SLAs), pricing, confidentiality agreements, and timelines with the outsourcing provider.
Step 4: Transition and Integration
This phase involves transferring the identified business processes to the offshore outsourcing provider. It may include training the provider’s team, setting up communication and project management tools, and integrating systems and processes to ensure smooth operation and oversight across the entire outsourcing journey.
Step 5: Ongoing Management and Communication
Effective communication and management are crucial for the success of offshore outsourcing. Regular meetings, progress reports, and performance reviews help manage the relationship, address any issues, and ensure that the outsourcing objectives are being met.
Step 6: Quality Control and Feedback
Establishing quality control measures and feedback loops is also essential to maintain the quality of the offshore outsourcing services availed. This can involve periodic audits, performance metrics analysis, and implementing changes based on feedback to continually improve the process and outcomes.
Step 7: Compliance and Legal Considerations
Ensuring compliance with legal and regulatory requirements in both the company's home country and the provider's country is critical. This includes data protection laws, intellectual property rights, labor laws, and tax implications.
Aside from the nature and process of outsourcing, among the most frequently asked questions about working with a BPO company are about its benefits. Let’s talk about what’s in it for you when you outsource specific business functions.
What Are The Benefits Of Offshore Outsourcing?
Offshore outsourcing comes with a number of advantages. Listed below are some of the most common benefits:
Cost Savings
Offshore outsourcing greatly lowers costs by using cheaper labor from other countries, saving money on salaries, office space, and equipment.
Access to Global Talent Pool
It enables access to a vast pool of skilled professionals worldwide, providing expertise that may be scarce or costlier domestically.
Focus on Core Business Functions
Businesses can concentrate their resources on core activities that drive growth and revenue, enhancing their competitiveness.
Scalability and Flexibility
Offshore outsourcing offers the ability to scale operations quickly in response to market demands without large capital investments or long-term commitments.
Operational Efficiency
Partnering with specialized offshore companies leads to improved workflows, productivity, and turnaround times, thanks to optimized processes and best practices.
While offshore outsourcing offers significant advantages, it also requires careful planning, effective communication, and diligent management to address challenges such as cultural differences, time zone discrepancies, and ensuring quality standards are met.
Want to learn more about the benefits of offshore outsourcing? Read: Offshore Outsourcing Guide: Benefits & Best Practices.
What Are The Most Commonly Outsourced Business Operations?
While outsourcing can now benefit almost every industry, there are still services that are preferred over others. For organizations all over the world, the five most commonly outsourced business operations are:
1. Information Technology (IT):
software development services, web development, IT support, network management, and cybersecurity
2. Customer Service and Support:
Such as call centers, help desks, and customer interaction management
3. Human Resources (HR):
payroll processing, benefits administration, recruitment, and training
4. Accounting and Finance:
Such as bookkeeping, tax preparation, financial analysis, and auditing
5. Manufacturing:
outsourcing the physical manufacturing process of goods, especially to countries with lower labor costs
These offshore services are commonly outsourced due to their universal demand across industries, coupled with the availability of specialized global providers who offer cost-effective and scalable solutions.
Didn’t find the exact service you need on the list above? Check out In-Demand Offshore Outsourcing Services for US Businesses.
What Are The Top Offshore Outsourcing Destinations?
Where should you find a trusted offshore outsourcing service provider? The top offshore outsourcing destinations are renowned for their skilled labor pools, cost-effective services, and business-friendly environments. As of 2025, the best countries for outsourcing include:
Philippines
With a strong emphasis on customer service and English language proficiency, the Philippines excels in providing offshore employees for call center services, customer support, and creative outsourcing.
India
Known for its vast pool of IT talent, India is a premier destination for software development, IT support, and business process outsourcing (BPO).
China
A global leader in manufacturing outsourcing, China offers a broad manufacturing base and access to a large, skilled workforce.
Poland
Recognized for its IT and software development expertise, Poland has become a preferred choice for companies seeking advanced technical skills in Europe.
Ukraine
With a growing reputation for its IT and software development talent, Ukraine offers highly skilled professionals in these fields at competitive rates.
By leveraging the strengths of these leading outsourcing destinations, companies can enhance their competitive edge, improve operational efficiency, and drive growth in the global marketplace.
Tips For Finding An Offshore Outsourcing Partner
Choosing the right outsourcing company is crucial for enhancing your business operations and achieving strategic goals. Here are the top five tips you can follow when choosing a service provider:
1. Define Your Goals and Requirements
Clearly outline your objectives and the specific services you need to outsource to ensure alignment with potential partners.
2. Research Potential Partners
Conduct in-depth research to identify outsourcing firms with a strong track record and relevant industry experience.
3. Evaluate Communication and Language Skills
Choose a partner with excellent communication capabilities to ensure smooth interactions and project management.
4. Assess Technical Expertise and Infrastructure
Verify the outsourcing firm’s technical capabilities and infrastructure to handle your projects efficiently and securely.
5. Understand Pricing and Contract Terms
Review the pricing structure and contract terms carefully to ensure transparency and flexibility to meet your business needs.
By following these tips and approaching the selection process systematically, you can find an offshore outsourcing partner that not only meets your current needs but is also well-positioned to grow and evolve with your business over time.;
Ready to choose an offshore outsourcing provider to work with? Check out 10 Best Offshore Outsourcing Companies in the Philippines.
Or better yet, take the first step by discussing your offshore outsourcing needs with an offshore outsourcing provider that you can trust. Just reach out — we’d be happy to answer any other questions you might have about offshore outsourcing.
Try Offshore Outsourcing with KDCI today.
It’s difficult to navigate offshore outsourcing with little knowledge, especially if you have specific business requirements to fulfill. With several things you need to consider, how do you get started?
This is where KDCI Outsourcing comes in. We take the time to understand your needs and requirements, company culture, and pain points to build you the perfect offshore team. With over 20 years of industry expertise, we’ll do everything for you, from finding, vetting, training, and certifying the right talents for your brand, up to managing your operations, saving you time and money — so you can focus on growing your business..
Learn more about our offshore staffing services and how it can empower your business to scale smarter. Contact KDCI to get started.
