The Art Of Offshoring - Diversify Offshore Staffing Solutions

T H E A R T O F O F F S H O R I N G

In this educational eBook, you’ll learn all about offshoring and how it can deliver
significant value to your business.
This value comes in the form of reduced costs, increased capacity, enhanced capability, higher levels of
efficiency and most importantly, accelerating your growth. One of the biggest benefits that offshoring can
deliver, if implemented properly, is to empower your local employees to focus on value-adding and growth
oriented tasks.
There are many perceptions of offshoring; some negative, and some positive. This eBook will provide you with
all of the information you needed to understand if it’s a business strategy that fits with your organisational
objectives.
At the end of this eBook, you will find a short quiz which will help you assess how ready your business is to
implement an offshore strategy.
W E L C O M E T O T H E A R T O F O F F S H O R I N G
Successfully
implementing
an offshore
team enables
businesses to
realise efficiency,
increase
capacity, expand
capability and
most importantly,
accelerate growth.
“
DIVERSIFY OSS | THE ART OF OFFSHORING2

Offshore labour models
The risks and the rewards
Success Factors for an Offshore Program
The steps to success
Offshoring pitfalls to avoid
Roles commonly offshored
C O N T E N T S
04
08
11
15
21
24

F I R S T T H I N G S F I R S T…
W H A T A R E T H E D I F F E R E N T
M O D E L S F O R U S I N G
O F F S H O R E L A B O U R ?
Whilst there are a range of different business models for the use of offshore labour, the main ones are
offshoring and outsourcing. Which of these are suitable for you will depend on what your business is trying to
achieve. In some instances you will need a combination of both models.

Outsourcing – services provided by a third party
Outsourcing involves your business engaging a third party to provide
services to you. Typically this will involve you making your data available
offshore to that third party which will trigger Privacy Act requirements.
With outsourcing you adopt the process of your outsourcing provider
and the ownership of this process and related Intellectual Property
typically remains with them. Outsourced providers usually work
on a priority based system and, depending on their workload, your
project could be shifted down the pecking order to meet other client’s
expectations. Additionally, you often have no say on the selection,
management or development of the staff who work on your account.
On the other hand outsourced providers will usually have a Service
Level Agreement (SLA) which specifies the agreed work standards/
volume and other metrics to be adhered to by them.
What does this mean for you?
You might have different contractors working on your account at
the various stages which may impact your business‘s continuity and
potentially, your intellectual property. It also means that the value
created through this process resides in the outsourcing provider
rather than in your business.
Outsourced
providers usually
work on a priority
based system and,
depending on
their workload,
your project
could be shifted
down the pecking
order to meet
other client’s
expectations.
“
O F F S H O R E L A B O U R M O D E L S

Outsourcing involves your business engaging a third
party to provide services to you.
Offshoring, on the other hand, is engaging staff to work
directly for your business in another country.
Offshoring – full-time staff based offshore
Offshoring, on the other hand, is engaging staff to work directly for
your business in another country. You can chose either to go to the
country yourself and set up your own operations or alternatively
work through an intermediary, like Diversify, who will help you find,
engage, host, train and manage your offshore team. It works quite
like a secondment arrangement where the offshore service provider
employs the staff but provides them to you for your exclusive use. You
are involved in the selection of the staff and have direct daily control
over them. The service provider will also give you and your team access
to the right technology, processes, procedures, amenities and systems
to ensure your offshore approach is successful.
A graphical representation of the different approaches can be seen on
the next page.

Captive
• Wholly-owned facility, built
or acquired
• Full control over people,
assets, systems/process
• Specific skill set might
be sourced such as
recruitment, benefits,
building maintenance, etc.
Assiasted Captive
• Wholly-owned facility
built and managed
with assistance of an
experienced partner,
usually a single entity.
• Assistance can be
sought for: People (e.g.
recruitment, training,
benefits), Assets (e.g. rent/
buy maintenance, fit-
out) and System/process
(e.g. IT infrastructure,
procurement, audit,
transition support)
Joint Venture (JV)
• Facility set up with third-
party to facilitate speed of
entry into market, reduce
risk, and protect IPR
• Partner chosen for local
market knowledge and
specific sector expertise
Build-Operate-Transfer
(BOT)
• Facility managed by third-
party partner initially over
to full client ownership at an
agreed-upon later stage
• Ownership of people and
assets rests with third-party
to begin with; control over
specific proprietary systems/
process could reside with
client right from the start
Outsource
• Facility fully managed by the
third-party provider
100% 0%Degree of ownership
Lower HigherDegree of risk
Offshoring/outsourcing business models

T H E R I S K S A N D R E W A R D S
Understanding the difference between offshoring and an outsourcing is an important part of determining which
approach should become part of your organisational strategy. The next critical components to be aware of are
the pros and cons of each approach.

Now, this is where we will start seeing the clear
difference between adopting an offshore approach
versus an outsourced one. Outsourcing is focused on
a quick, externally managed offshore labour solution
whereas offshoring is focused on extending your
existing workforce by utilising technology to manage
staff offshore.
Outsourcing - Pros
• Good when the business lacks a developed process and procedure
for the outsourced projects being delivered
• Can be quick to implement by leveraging the knowledge of the
outsourcing provider
• SLAs make the provider responsible for the quality and timeliness
of outcomes
Outsourcing - Cons
• More expensive than offshoring
• Possible loss of control over a company’s business processes with
different outsourced team members working on the business
account from time to time
• Can be difficult maintaining local knowledge and quality when staff
are moved from one client account to another
• Sluggish response times and slow issue resolution when the
outsourced team is dealing with other client’s priorities
• Shortcomings in performance versus expectations as there is no
‘dedicated’ employee working on your account – consistency and
continuity is sacrificed
• Potential Privacy Act issues
• The value of the business process and its ongoing improvement
do not transfer to the client
• Usually require long term contracts
T H E R I S K A N D R E W A R D S

Offshoring - Pros
• Access to a wide, talented pool of candidates
• Can comply with Australian Privacy Principles (i.e. no export of
information offshore) – this is of course dependent on where your
server is based.
• Greater transparency as you manage your team members directly
• More affordable over the long term
• The client owns processes and intellectual property
• Employees become long term, value adding members of your team
• Employees will become familiar with your business, local employees
and clients, ensuring a consistent and seamless experience
• Business continuity – you always know who you’re dealing with
• Direct selection/control of staff
• No long term contracts
Offshoring - Cons
• Client provides the business process which ideally requires the
client have good and well documented process and procedures
• Service quality remains at the clients’ risk
• Implementation usually takes longer than with outsourcing
• Costs may initially increase while project is being implemented –
particularly if new resources are run in parallel with existing ones
• Client is responsible for the management and development of
their staff
T H E R I S K A N D R E WA R D S
Overview
It’s quite obvious that both of these approaches have unique benefits
and drawbacks. An outsourced approach is more suited to a business
that does not have well developed internal processes and systems in
place and who may be looking for a “plug and play” solution or where
the work volume does not justify a full time employee.
Offshore teams, on the other hand, work well for organisations that are
looking to grow their workforce, adding value via increased capacity
and enhanced capability. Offshoring is suitable for businesses who
already have solid processes and systems and who would like to own
and control the way their offshore workers undertake the work. An
offshore team can assist local business units in being more productive
and efficient. It empowers locally employed, highly remunerated
employees focus on value-adding or growth oriented tasks.
Ultimately, your decision on whether to outsource or offshore will be
based on the goals and objectives of your organisation, and the types
of strategies you are looking to execute to facilitate this growth.
If you do decide to adopt an offshore approach, it’s
time to look at how you can design your program for
success.

S U C C E S S F A C T O R S F O R A N
O F F S H O R E P R O G R A M
There are many factors that need to be considered when assessing the feasibility of an offshore workforce. We’ll
cover off the factors that we believe are integral to achieving offshore success.

The Importance of Location
Selecting the right offshoring location in the Philippines is a critical
component in achieving a successful outcome. As with any business
decision, conducting your due diligence on each specific location is a
must. Determining which part of the Philippines is right will essentially
come down to specific goals and objectives of your business and then
narrowing down the roles you are looking to offshore.
Regional areas can be attractive where low level, unskilled work is
being offshored and where the work is not time critical. These areas
will provide the cheapest labour but it will be important for the client
to have the resources and patience to invest in training their staff.
The reliability of key infrastructure and utilities such as electricity,
internet, transport and even water declines as you move further away
from the capital. It is also important to consider that some of these
more regional areas are potentially more disaster prone (for instance
Clarke Freeport Zone is near an active volcano) so it is important to be
aware of the implications of each potential business location, conduct
your research and take stock of the business continuity issues before
choosing a regional location.
S U C C E S S F A C T O R S F O R A N O F F S H O R E P R O G R A M
As with any
business
decision,
conducting
your due
diligence on
each specific
location is a
must.
“

Location Considerations
To determine which area is suitable for your business to offshore,
consider the following:
• What is the level of education, experience and skill I require?
• Am I looking to offshore roles where competition for candidates
is fierce?
• Are the roles quite simple, easy and process driven?
• Do I want to set-up a call centre or voice operation?
• Is cost a major factor? The cheaper the better?
• Do I value employee engagement and cultural integration?
Once these have been considered the above questions, and you have
identified which ones are important to you, it’s time to consider what
location, within the Philippines, will enable your offshore workforce
strategy to deliver the best result. To do this, we’ve highlighted figures
from an industry leading report conducted by Tholons. This report
ranks global offshore locations that businesses are currently utilising.
The report ranked locations based on a number of criteria rating the
100 destinations assessed in the following order:
Metro Manila
2nd
Cebu City
8th
Davao City
69th
Santa Rosa Laguna
82nd
Baguio City
95th
Metro Clark
98th

Other service providers often select the regional areas
because they are cheaper to establish and operate
and in addition have significant tax incentives for the
business operators.
Diversify only has offices in Metro Manila.
Offshoring in Metro Manila
There are a number of key reasons why Metro Manila ranks so highly
and why Diversify selected it as a base for both of our office facilities –
these reasons include:
• It has access to the highest-quality and largest skilled talent pool
in the country.
• It is expat friendly and has close proximity to key amenities such as
airports, transportation, restaurants and shops.
• It is home to over 1000 multi-national and global companies
• It is employee friendly offering access to a wide range of amenities
as well as close proximity to major transport hubs.
• It is the capital city of the Philippines where both large and small
companies from other countries have established their businesses.
• It is considered the nation’s gateway to the world.
• The latest technology is released quickly here so business owners
who are planning to offshore can expect that IT available here is it
is up to date, aligned to global standards and able to deliver their
requirements more efficiently.
• It has far better, more developed and more reliable infrastructure
than any of its regional counterparts

T H E S T E P S T O S U C C E S S
Now that we’ve established what offshoring is and why you should consider it for your business, it’s time to
look at the steps to success. It’s great that you’ve considered offshoring as a viable business strategy. However,
ensuring your offshore program succeeds is even more important. We’ve assisted countless businesses over the
years achieve success from their offshore programmes and we’ve developed a number of considerations your
business needs to take into account if you’re to achieve long-term offshore success.

Access to accurate research can help with the messages
(e.g. there are a number of studies which have shown
that the net effect of offshoring is actually growth and
not reduction in local employment).
The importance of strategy
When it comes to success in business, proper planning is always
a crucial part and it is no different if you are considering offshoring.
This means having proper preparation to develop your business and
factoring it different parts of your strategy- whether it’s an allocation of
resources, commitment from senior management, or utilising available
technology for efficiency.
When embarking on an offshoring project, a business should be
very clear about the objectives they are seeking to achieve and the
timeframes for implementation. These should be documented and
ideally a pilot project should be the first step in any offshoring strategy.
Consideration should also be given to those functions which are most
suitable to being offshored. Functions which have poor processes
locally will only get worse when offshored unless the offshoring is done
in conjunction with a process review and re-engineering.
Preparing a clearly defined business case for an offshore approach
is also a significant step toward a successful offshore program. A
business case should cover off why the approach is being considered,
what an offshore approach aims to address, what are the possible
outcomes (benefits, costs, timescale, risks) and finally a detailed
recommendation. This document should be able to provide you with
the key details required to develop a business case for success.
Communicating the plan
Once the strategy has been set, the business needs to move onto the
very important task of communicating what it hopes to achieve to all
stakeholders, both internal and external.
Internally employees will want to know what does it mean for them, i.e.
are their jobs on the line or will the business just be adding additional
resources? This will also be the case with suppliers. If the decision
to offshore is to be made public, thought will be need to be given to
managing and controlling the messaging to external stakeholders such
as clients, the media and competitors. Will this be seen as a simple
attempt to save money by moving local jobs offshore or is it part of an
international drive to increase the services on offer to clients without
increasing costs? Clear thought and planning around this messaging
is as important as communication of the message itself.

Bringing the Filipino staff to Australia for training and
having local staff travel to the Philippines to assist
with set up etc. will go a long way to fostering mutual
understanding and positive staff relationships.
Organisational “buy-in”/ change management
Often, the problems that are experienced when first offshoring don’t
come from the offshore staff but stem from local staff attempting to
sabotage any attempts to achieve a successful outcome. It is important
to identify “internal champions” who will drive the offshoring process
and be rewarded publicly for its success. All managers dealing with
offshore staff should have their position descriptions modified to
include these responsibilities and their KPIs’ should include the success
of the offshore team. Inter-office travel is also extremely important to
achieve local staff acceptance.
Process review and training
In order to realise the full potential from offshoring any organisation
must include process review/re-engineering and training as two
essential parts of their offshoring plan. Moving a role offshore is an
ideal time to revisit the processes used by that role, whether they are
as efficient as they can be and as importantly whether they should be
revised for an offshore position. Training should be provided to both
the new offshore staff and also to your local staff not only in relation to
work processes but also to assist cultural awareness, understanding
and enable effective distance communication. It’s important to note
that a full process review is not always necessary if the existing process
is working optimally. We encourage it because it can highlight any
issues with the process prior to an offshore program commencing
which can reduce any technical issues.
Training should be provided to both the
new offshore staff and also to your local
staff not only in relation to work processes
but also to assist cultural awareness
“

Where to start?
It is usually best to start the offshoring journey with roles that are internally facing and not mission critical, ideally running your pilot program in parallel with
the same function that is performed locally. As you become more confident in the process and achieve a good level of local staff buy-in you can then look
to expand the offering in a well-considered way. Slow and steady may take longer, but is far more likely to achieve quality outcomes with minimal problems.
Roles which can be a good place to begin include:
Accounts payable and
receivable
Word processingGraphic design Data entry Web chat

IT platform – data location/access security – testing
of connection, IT escalation process cess review and
train
What needs to go in here? Are there any sections I can pull this
information from? Do we want technical data or simply to talk about
what goes on tech wise…
Roll out
Once you’ve undertaken the initial steps in preparing for the launch
of your offshore program, it’s time to get started. It’s important to
ensure that you’ve got a structured roll out program in place. Before
commencing, make sure you’ve considered all of the following points:
• Is your technology set-up and ready to go?
• Have you communicated the changes to your local employees
properly?
• Have you briefed your offshore champions properly?
Work closely with your offshore solutions service provider. They help
you to ensure your roll out is as smooth as possible. They understand
the factors that enable offshore success and the ones that could
impact on the delivery of your program. A good offshore provider will
work collaboratively and closely with you to get your program up and
running and once you’re underway, they will slowly step out of the way
to leave you to the running of your offshore team. They should also
always be there on the sidelines to give you the guidance and support
you need to achieve the benefits and enjoy the opportunities that arise
with your offshore workforce.

Staff productivity, engagement and retention
Having invested the considerable time and effort to establish your
offshore team you now want to ensure that you are obtaining an
acceptable level of productivity from them and that you keep staff
attrition as low as possible. This is where a twin pronged strategy of
performance management and staff engagement is important.
Clear KPI’s, career paths and skills development opportunities should
be provided to all offshore staff as should an overarching staff
engagement program including things such as team building functions,
general training and recognition programs. You need to treat your
offshore staff as you would your local staff and sometimes even with
more effort to help offset the distance. Good staff retention and high
moral are imperative to achieving the best results with your offshoring.
You could even consider travelling to meet your offshore team or fly
them over to your local offices to the local teams that will be working
with them. In a best case scenario, you could do both. Travelling to
meet your offshore team members and meeting with them personally
aids in the development of a positive working relationship from the
outset.
Making staff relationships work
There are some keys rules that should be remembered when
developing the relationships between your local and offshore staff:
• Individuals and interactions are more important than processes
and tools
• Plans should be allowed to evolve and respond to feedback
• There must be ongoing investment in learning by both local and
offshore staff
• Staff must work together, face to face (virtually) daily
• Your offshore staff should feel part of your local team and your
local team should value them
• An attitude of mutual respect should be encouraged.

O F F S H O R I N G P I T F A L L S
T O AV O I D
In our experience working across many industries, here are six key pitfalls SMEs need to avoid.

Set and forget? Forget it!
Local managers need to fully direct their offshore teams to get the
most from them, just as if those staff were operating down the hall.
Businesses that prioritise briefing, engagement and the job satisfaction
and upskilling of their employees in the Philippines are far more likely
to succeed.
O F F S H O R I N G P I T F A L L S T O AV O I D
Negotiating foreign business conditions
It’s important to investigate and understand the issues which arise from
operating offshore. It will take time to establish a well-oiled offshore
team which integrates well with your local team. Understanding the
local business environment including local labour laws and cultural
differences is crucial to making this work. SMEs that succeed in
offshoring partner closely with their providers to understand the
potential issues and the range of solutions available to them.
Cultural misunderstandings
Clear and effective communication is a key element to successful
offshoring. While the Philippines has a 94 percent English literacy rate
and direct exposure to Western culture, there are subtle differences
that local staff will need to be aware of so misunderstandings do not
occur. Best practice offshoring providers will offer induction programs
for all staff – Filipino and Australian – to make sure teams start with a
firm footing and mutual understanding. We find that concentrating on
clear communication also has positive flow-on effects within a business’
Australian operations.
Managing change
Any change can raise anxiety among employees. Communicating
with local staff about the overall growth strategy of the business and
the role that offshoring will play is not just good management, it’s an
opportunity to re-engage employees with the future direction of the
company.

O F F S H O R I N G P I T F A L L S T O AV O I D
Data security and intellectual property
In a borderless digital world, data security should be a priority for
all businesses, not just those with offshore teams. A data security
and location plan should be developed, covering where data will be
stored, levels of access, physical security measures within the facilities,
contractual arrangements and the consequences of data theft. We
recommend companies have all staff (in Australia and offshore) sign
a Deed of Confidentiality and an Assignment of Intellectual Property.
There’s no magic bullet
It is important to manage expectations during the rollout of the
offshoring plan. With careful planning in the establishment phase,
the rewards of moving a business up to the next level – far quicker
than would otherwise have been possible – can be substantial. By
setting achievable time-frames and deliverables, staff will soon see the
benefits of the decision.
For all sizes of business, a global workforce is the way of the future and
offshoring is a part of this process. For SMEs, by recruiting staff in a
lower-cost environment to undertake process-orientated work, capital
is freed up for the business to invest in the parts of the operation that
generate revenue.
For SMEs, by
recruiting staff
in a lower-cost
environment
to undertake
process-
orientated work,
capital is freed up
for the business
to invest in the
parts of the
operation that
generate revenue.
“

R O L E S C O M M O N LY
O F F S H O R E D
There are many back office roles which can be offshored. Some of the more common roles that are currently
offshored successfully are listed here.

Roles commonly offshored
• Accounts payable and receivable
• Business analyst
• Credit manager
• Book keeper
• Payroll officer
• Graphic designer
• Web designer and Web developer
• SEO/SEM manager
• Marketing assistant, including CRM database management
• Word processing
• Human Resource Administrator
• Recruitment manager
• Level 1 and 2 help desk support
• Software developer
• Mobile applications developer
• Legal research clerk
• Virtual assistant
• Draftsmen
• Quantity surveyors
• CAD Designers
• Customer service staff
R O L E S C O M M O N LY O F F S H O R E D
The roles that you can offshore are not limited to this list. An offshore
solutions provider can assist your business in understanding what
roles can be offshored successfully and which ones can’t.

27th Floor, 24/7 McKinley Building, 24th
Street corner 7th Avenue,
Bonifacio Global City, Taguig, Philippines
E: hello@diversifyoss.com
W: www.diversifyoss.com

The Art Of Offshoring - Diversify Offshore Staffing Solutions

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