How Onshoring Can Support Business Resilience

Once billed as the perfect way to scale tech teams at pace, offshoring enables companies to shift service centres or routine operations to a location outside of their country and benefit from more cheaply available resources.

While cutting a company’s overall costs is enticing, offshoring has several moving parts and a potential for things to go wrong—often unavoidably. With alternative, cost-effective ways to build and scale teams more widely available, onshoring (or reshoring) can help businesses to collectively rebalance the country's economy, create new jobs and cut our trade deficit—all while making a social impact through the development of local talent.

In the U.K., for instance, there are millions of people out of work and education who want to work. With capability now so close to home, is offshoring a lazy approach to growth?

 

Cost savings aren’t a guarantee

Cutting costs is often the main motivation for offshoring. When companies operating in a developed country relocate to a developing country, they can take advantage of lax laws, lower tax rates and cheap resources. But there are significant hidden costs.

Managing offshore teams means managing people in different locations, different time zones and with different native languages. This can mean hiring managers specifically to oversee the activity of offshore teams or significant travel expenses to send leadership overseas from other offices.

 

Consider the customer

Customers today have a good awareness of their data privacy rights and are increasingly aware of why personal data is being collected and used—and by whom. Customer trust in how their data is protected is critical to success—and 76% of CEOs agree it drives business competitiveness too, according to Accenture. Organisations cannot take any data security risks.

Yet when key software services and staff are relocated to offshore locations, the risk of data leaks or breaches increases tenfold. Sensitive data and systems can only truly be secured through strict controls, protocol and oversight. If controls in an underdeveloped country are more lax—the consequences can be catastrophic for customer loyalty.

Equally important is customer satisfaction. Offshoring can leave customers frustrated when there are prolonged delays for a response or issues are lost in translation. Language barriers can impact effective support, and while cultural issues should be considered as a matter of ethical and professional courtesy, they should not become barriers.

 

What is the personnel price of offshoring?

High employee morale will positively impact your bottom line. It’s important to remember that moving jobs and responsibilities offshore can leave existing staff feeling threatened or resentful—even lonely. This will likely be noticed across your talent retention.

 

Should it be coming home?

Several factors could influence a company’s decision to set up onshore subsidiaries or partner with local service providers, including specific industries, company goals and market conditions.

What’s important to remember is that onshoring is a strategic move. Successfully onshoring a business requires careful planning, a thorough understanding of the domestic market and effective management of the transition process.

Here is what the process should look like to help you consider this option.

• Assess the reason for onshoring. Are you reducing costs or improving quality control and compliance? Or are you aiming to improve customer service by being closer to your main market? Understand your why before plotting how.
• Is it feasible? Analyse what you can: the cost, the market and any supply chain needs.
• Get strategic. Choose a location that offers the best balance, establish a timeline and confirm a budget.
• Manage legal and regulatory compliance. Understanding the implications and requirements of relocation–don’t be caught out.
• Build out infrastructure and technology. Find your home—securing or building the necessary facilities—acquire and install the systems or equipment you will need to hit the ground running.
• Build your workforce. Find great talent, upskill any existing workforce and focus on a retention plan
• Understand Logistics. Establish relationships and build a network to land with. This is crucial to minimise disruption.
• Prioritise communication and change management. Keep all stakeholders informed—this includes employees and customers. This should help ensure a smoother transition.
• Monitor and adjust. Establish key performance indicators (KPIs) to measure the success of the onshoring process and regularly review and refine operations to address any issues.
• Leverage government support. Explore government programs, incentives and grants that might be available for businesses that have onshore operations.

 

High Performance At Home

Successful onshoring can mean improvements across quality control, regulatory compliance, customer perception, employee responsiveness and reduced lead times for innovative activity.

While the business benefit is clear, the social impact that companies make by reshoring services in your country can be even more of a draw. Onshoring of products and services is becoming one of the corporate responsibility objectives for organisations. By keeping services and employees in the country, organisations are contributing to healthy job creation and building a specialised workforce—with the skills to lead organisations in the future—driving innovation with local professionals and helping to rebalance the economy commercially.

I encourage businesses not to settle for something that looks big and shiny, but to build teams that are undeniably fit for purpose. Invest in local talent and build trust, and they’ll be a motivated, specialised workforce that prioritises quality and compliance. This is how to build a sustainable business.