In a hypercompetitive global economy, companies use cost-effective solutions from other parts of the world by outsourcing their workforce. In fact, 80% of companies around the world leverage outsourcing today.
Businesses have increasingly turned to India and the Philippines for outsourcing their workforce. For the business process outsourcing (BPO) market alone, India accounts for 65% of the market, while the Philippines accounts for around 15%, with one of the fastest-growing freelance workforce supply markets in the world.
If you’re seeking to outsource, where should you best hire from—India or the Philippines?
This guide helps you decide. First, we’ll discuss what workforce outsourcing is, followed by how outsourcing to India and to the Philippines are. Then, we’ll compare both and give you tips on how to decide.
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Read on for more.
What is workforce outsourcing?
Workforce outsourcing is when a company hires a third-party talent management partner, such as a BPO center or a virtual assistant company, to perform recruitment and HR functions traditionally handled in-house.
This is particularly useful for growing businesses that need:
- Cost-effective administrative, marketing, and financial skills support so they can focus on building their businesses
- Seasonal or limited-time project boosts in staffing
- Specialist skills and technological expertise that are difficult to find and are very expensive.
Statistics show that outsourcing can boost efficiency by 25% and reduce time-to-market by another 25%. With the right virtual assistant company, for example, businesses can save up to 70% of their traditional hiring costs.
With technological disruption, global skills shortages in some fields, and new ways of working, attracting and retaining talent with the right skillsets and fit has become very challenging for businesses.
Partnering with third-party talent management companies has become the winning solution.
Why is India so popular for outsourcing?
India is a favorite outsourcing destination for its vast pool of skilled labor, particularly in the information technology (IT) and manufacturing sectors. There’s also only around a 10-hour time zone difference between India and the United States, making it popular for US companies that prefer closer work time syncing.
History of Outsourcing to India
Outsourcing to India began in the 1980s with global airlines and information technology (IT) companies. Some early adopters were American Express, British Airways, General Electric, Swissair, and Texas Instruments. These companies were apparently drawn by India’s skilled, English-speaking workforce and cost-effective solutions.
The 1990s saw growth in IT and BPO outsourcing due to economic liberalization and advancements in communication technology.
Today, India hosts many Fortune 500 companies’ call centers and tech support operations, cementing its role as a global outsourcing hub.
What are the advantages of outsourcing to India?
Companies outsource to India primarily for access to a vast talent pool, especially in IT and tech sectors. Leading firms like Accenture, Cognizant, Infosys, TCS, and Wipro offer innovative solutions and services.
Another key reason is cost savings due to lower wages and favorable exchange rates, enabling significant labor cost reductions without sacrificing quality. India’s strong IT infrastructure and supportive government policies further enhance its appeal for outsourcing.
Why is the Philippines a popular destination for outsourcing?
Outsourcing to the Philippines offers businesses the benefits of cost savings and access to a highly educated and skilled workforce with one of the highest English proficiency scores in Asia.
With government support like tax incentives and infrastructure development, the Philippines also offers a diverse range of services, from administrative and customer support to IT, finance, and healthcare services.
History of outsourcing to the Philippines
Outsourcing to the Philippines gained traction in the 1990s, driven by the country’s government initiatives to attract foreign investments and develop its telecommunications infrastructure.
The establishment of the Philippine Economic Zone Authority (PEZA) in 1995 significantly contributed to this growth by providing incentives to foreign investors and facilitating the development of IT parks and business process outsourcing (BPO) centers.
This period marked the beginning of the Philippines’ transformation into a global outsourcing hub, with companies recognizing the potential of its skilled, English-speaking workforce.
During the early 2000s, the outsourcing industry in the Philippines experienced rapid expansion, positioning the country as a leading destination for call centers, customer support, and back-office services.
The rise of the internet and advancements in communication technology further enhanced this growth, enabling seamless collaboration between Filipino workers and their international clients.
By 2005, the Philippines had firmly established itself as a premier outsourcing location, attracting numerous multinational companies and making substantial contributions to the country’s economy.
The Philippines is now popularly known as “The BPO Capital of the World.”
What makes the Philippines one of the best choices in outsourcing?
The Philippines is a top outsourcing destination due to its cost efficiency, offering up to 70% savings on labor costs compared to Western countries.
This doesn’t sacrifice quality, as the country has a large pool of skilled, English-speaking professionals suited for administrative support, customer support, healthcare, finance, and IT services. The Philippine talent pool’s close affinity with Western culture and language proficiency facilitate smooth collaboration, while its strategic time zone ensures 24/7 operations. Robust infrastructure and strong government support further enhance its appeal, making the Philippines a reliable choice for outsourcing.
Cost Comparison: Philippines vs. India for Outsourcing
Both the Philippines and India offer cost savings compared to hiring from Western countries, but there are differences in their average base salaries and pricing models.
We compare the average salaries and pricing models for virtual assistants below to illustrate these differences.
Average Salaries for Virtual Assistants (VAs)
In the Philippines, the average annual salary for a virtual assistant is between $4,344 and $7236. In India, the average annual salary for a virtual assistant is approximately between $2,196 and $4,512.
Although it looks like India has lower rates than the Philippines, you must also consider the pricing models and hidden costs that account for these differences.
Pricing Models
Several factors influence the pricing models for outsourcing in both countries. These include the complexity of the tasks involved, the level of expertise required, and the cost of living.
The Philippines, with its strong communication skills and high level of English proficiency, is often preferred for roles that require excellent communication, such as administrative and customer support and marketing. India, known for its technical prowess, is a popular choice for IT and tech-related services.
In terms of cost of living, both the Philippines and India have significantly lower costs than those of Western countries, yet there are still distinct differences between the two.
In the Philippines, the cost of living tends to be higher, particularly in urban centers like Manila, where housing, goods, and services can be more expensive. This reflects in the higher average salaries and hourly rates for virtual assistants, as professionals need to meet their living expenses.
In contrast, India generally offers a lower cost of living, even in its major cities like Mumbai and Bangalore. This lower cost of living translates into more competitive pricing for outsourcing services. The relatively affordable lifestyle in India supports the lower average salaries and hourly rates for virtual assistants, making it an attractive option for cost-conscious businesses seeking technical expertise and support.
Hourly rates
The hourly rate model is likely the most common pricing structure for outsourcing services in both the Philippines and India.
In this model, clients pay for each hour of work completed by the virtual assistant (VA) or outsourced professional. This model is particularly advantageous for projects that require flexibility and may vary in scope over time.
In the Philippines, hourly rates for VAs can range from $3 to $10 per hour, depending on the complexity of the task and the level of expertise required.
Indian VAs generally offer similar competitive rates, ranging from $2 to $8 per hour.
This slight difference reflects the variance in the cost of living and wage expectations between the two countries.
Read this guide on virtual assistant costs for more details.
Project-based Rates
For tasks with a clear beginning and end, the project-based rate model can be highly effective.
Clients pay a fixed amount for the completion of a specific project, regardless of the time it takes.
This model ensures that both parties have a clear understanding of the deliverables and the cost involved, reducing the risk of unexpected expenses.
In the Philippines, project-based rates can vary widely, from $100 for simpler tasks to several thousand dollars for more complex projects such as website development or comprehensive marketing campaigns.
In India, project-based rates are influenced by the complexity and scope of the project, with rates ranging from $100 to several thousand dollars.
Retainer packages
Retainer packages involve clients paying a fixed amount every month for a set number of hours or specific tasks. This model is ideal for businesses requiring consistent, ongoing support, such as those from dedicated VAs.
This model offers the advantage of predictability in budgeting and ensures that the VA or outsourced professional is always available to handle the client’s needs.
In the Philippines, retainer packages range from $300 to $1,500 per month, depending on the number of hours and the expertise required.
Indian VAs offer similar packages, with monthly rates typically ranging from $200 to $1,200. These packages often come with added benefits such as priority support and the ability to roll over unused hours to the following month.
While the base rates for outsourcing may appear attractive, businesses must also consider hidden costs such as training, time zone adjustments, and communication barriers.
Both countries have robust infrastructures and a large pool of skilled professionals, but ensuring consistent quality and overcoming cultural and geographical divides can pose challenges.
Hidden Costs
In outsourcing to countries like the Philippines and India, there are hidden costs that must be considered to make an informed decision.
We compare below the hidden costs of outsourcing to these two popular destinations, providing insights into what businesses might encounter when engaging with providers in the Philippines and India.
Training and Onboarding Costs
One of the primary hidden costs of outsourcing is the expense associated with training and onboarding new virtual assistants (VAs) or outsourced professionals. Both the Philippines and India have large pools of skilled workers, but the specific needs of each business may require tailored training.
In the Philippines, the high level of English proficiency and strong cultural affinity with Western countries can reduce the time and cost involved in training. Filipino professionals often have experience working with Western clients, which can streamline the onboarding process.
In India, while the technical skills are often exceptionally high, there might be a need for more extensive training to align with specific business practices or communication styles, especially if the outsourced roles require a high level of client interaction. This can add to the initial costs of outsourcing.
Time Zone Adjustments
Time zone differences are another hidden cost that can impact the efficiency of outsourced operations.
Generally, India has only more or less 10 hours’ time zone difference from the United States, which has six different time zones, while the Philippines has around 13 hours’ time zone difference from the United States.
Depending on the specific time zones between the contracting company in the United States and the third-party outsourcing provider in either India or the Philippines, this can be advantageous for contracting companies that require round-the-clock operations.
This may also require adjustments in work schedules and additional coordination efforts. Businesses might need to implement overlapping work hours or incur more costs for night shifts to ensure seamless communication, thereby adding to the overall cost.
Communication Barriers
Effective communication is crucial for the success of any outsourcing arrangement.
The Philippines boasts a high level of English proficiency and a neutral accent, which can significantly reduce communication barriers. This is particularly beneficial for roles that require direct client interaction, such as administrative support, marketing, customer support, and reception roles.
In India, while English is widely spoken and understood, accents and communication styles can vary. This can lead to potential misunderstandings or the need for additional communication training. Ensuring clear and consistent communication might require investment in language training or hiring intermediaries to bridge any gaps.
Maintaining Quality Across Geographies
Maintaining a consistent standard of quality across different geographical locations can be challenging.
The Philippines’ cultural affinity with Western countries often translates into a better understanding of client expectations and quality standards. Filipino professionals are known for their attention to detail and customer-centric approach, which can minimize the risk of quality issues.
In India, the focus on technical skills and innovation is a strong advantage. However, businesses may need to invest in additional quality assurance measures to ensure that the outputs meet their specific standards. This can involve setting up dedicated quality control teams or implementing rigorous review processes, adding to the hidden costs.
Cultural Differences
Cultural differences can influence various aspects of the outsourcing relationship, from communication and collaboration to work ethics and expectations.
The Philippines’ Westernized culture and work approach often align well with the needs of Western businesses, reducing the potential for cultural clashes.
In India, while the work culture is highly professional and driven, there may be differences in work styles and expectations that require adjustment. Businesses might need to invest time and resources in cultural training or workshops to bridge these gaps and foster a harmonious working relationship.
While both the Philippines and India offer competitive pricing and a wealth of skilled professionals, the hidden costs associated with outsourcing to these countries can vary.
Training and onboarding, time zone adjustments, communication barriers, maintaining quality, and cultural differences are all factors that businesses must consider.
By understanding and planning for these hidden costs, businesses can make more informed decisions and optimize their outsourcing strategies to achieve the best possible outcomes.
Skillset comparison: Philippines vs. India for outsourcing
Here, we compare India’s and the Philippines’ outsourcing talent pool in terms of their different skillsets.
Technical Skills
India has long been recognized as a hub for technical support and IT-related services. The country boasts a large pool of professionals skilled in information technology, software development, and related technical fields.
This technical prowess is supported by robust educational institutions and a strong emphasis on STEM (Science, Technology, Engineering, and Mathematics) education.
Meanwhile, the Philippines also has a growing IT sector, although it is not yet as dominant as India’s. However, the country is making strides in developing technical skills, particularly in areas like web development and digital marketing. The Philippine government has been investing in IT education and infrastructure to support this growth.
Communication Skills
The Philippines is known for its workforce’s strong communication skills, making it a preferred destination for customer support and roles requiring excellent verbal and written communication.
The high level of English proficiency, combined with a neutral accent, enables Filipino professionals to effectively interact with Western clients. This cultural affinity with Western countries further enhances their suitability for communication-centric roles.
On the other hand, while India also has a significant number of English speakers, their strong accents and communication styles can sometimes pose challenges for Western clients. However, Indian professionals are known for their adaptability and willingness to undergo training to meet specific communication needs.
Industry Specialization
India’s outsourcing industry is heavily skewed towards technical support, software development, and IT services. Companies looking for expertise in these areas will find a wealth of talent in India. The country’s strong focus on technical education and its large workforce make it an ideal choice for tech-related outsourcing.
The Philippines, on the other hand, excels in industries that require strong communication skills. Customer support, virtual assistance, and service-oriented roles are where Filipino professionals shine. The country’s cultural affinity with the West and high English proficiency make it a standout choice for these roles.
Outsourcing: India or the Philippines?
Choosing between the Philippines and India for outsourcing depends largely on the specific needs of your business.
For customer support and communication-centric roles, the Philippines offers a compelling proposition with its strong language skills and cultural affinity with Western countries.
For technical support and development, India’s large pool of skilled IT professionals makes it an ideal choice.
Understanding the different skillsets and their respective advantages, as well as the pricing models and hidden costs, can help you make informed decisions that align with your business’ strategic goals.
Ultimately, your decision should be based on your business needs and the specific skills required for the roles you are looking to outsource.
MyOutDesk can help you find the best workforce to meet your needs. Let’s talk.
