The Rise of Outsourcing in Southeast Asia
Outsourcing in Southeast Asia is no longer just about saving costs by sending business processes overseas. Here's what you must know before outsourcing in SEA and operating a remote business.
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The continuing economic expansion in Southeast Asia (SE Asia) has been turning what are commonly considered to be emerging countries into economic powerhouses in their own rights. 2019 reports by the Organisation for Economic Co-operation and Development states that the “GDP in Emerging Asia is estimated to grow by an annual average of 6.1% in 2019-23.”
In addition, the global market in outsourcing is booming, boosting the economies of SE Asia countries like The Philippines. With the overall regional growth, outsourcing in SE Asia is no longer just about saving costs by sending business processes overseas. It has become a viable opportunity to quickly test these markets for the potential to set up remote operations there.
In this article, we’ll take a quick overview of SE Asia outsourcing, get some tips to help you more easily operate a remote business, look closer at business process outsourcing, and discuss how to rapidly test new markets with outsourcing.
Outsourcing is key to running a successful remote business. By outsourcing processes to less expensive or restrictive countries, businesses can spread their reach globally at a price point that makes sense.
A Statista survey of global outsourcing 2000-2018 showed that outsourced services reached a market size of $85.6 billion in 2018 — and recent trends indicate that the market will continue to grow for the foreseeable future.
Outsourcing Growth in the Philippines, Indonesia, and Vietnam
While China and India have long been dominant in outsourcing, recently Southeast Asia countries such as the Philippines, Indonesia, and Vietnam have been securing more and more outsourcing work.
To demonstrate just how attractive these markets are, the 2017 A.T. Kearney Global Services Location Index ranked the Philippines, Indonesia, and Vietnam in the top ten for outsourcing in the business environment, financial attractiveness, people skills, and availability of workforce.
Global Industry Analysts forecasts an outsourcing annual growth rate in the Asia-Pacific region at 8.5%.
Why the Time is Right to Outsource to Southeast Asia
Along with the GDP growth mentioned earlier, another sign of a continuing robust economy in Southeast Asia is the rise of the region’s middle class.
Bain and Company reports that “50 million new consumers will join the ranks of the middle class in Indonesia, Malaysia, the Philippines, Thailand, and Vietnam by 2022, contributing to the region’s $300 billion middle-class disposable income. The middle class will expand to include 350 million people and continue on its upward trajectory.”
What this all means is that the time is now to do business in SE Asia. A growing overall economic picture — combined with increased capability and growth in outsourcing — creates an ideal opportunity to expand using outsourcing to operate a remote business.
When it comes to running a remote business in a foreign territory, outsourcing is a great way to expand internationally. But doing so comes with substantial administration costs for local companies. You need to hire employees to manage the office, handle investment reporting, and comply with local taxes, among other issues.
In order to set up an operation in another country more easily and without substantial costs, the solution is to use an Employer of Record service provider, like Emerhub.
What is the Employer of Record?
An Employer of Record (EoR) is an organization that enables you to employ people in a country before establishing a legal entity there. It hires employees who will be on their payroll, but work for other companies.
Perhaps you have a company in Canada, but you wish to expand to Southeast Asia, maybe to the Philippines. An Employer of Record enables you to employ people before your actual business establishes a legal entity there. It also works if you’re not planning to operate in the Philippines, and maybe only want to outsource IT services or customer support.
What About Importing?
Emerhub can also handle more complex importing-related issues, such as:
- Importer of Record (IoR) — An IOR service allows you to import products without acquiring import licenses, by using the already existing licenses and expertise of a different entity.
- Nominee Product Holder — In Indonesia, to import certain products you need to have a National Standardization (SNI) license. Emerhub can become your nominee product holder. As a result, we hold the product license on the client’s behalf, registering the products for SNI. This avoids you having to set up a company locally.
By using an EoR or IoR, you gain the flexibility to do business almost anywhere across SE Asia without having to register your business in that location. This is a powerful tool that comes in handy when outsourcing business and information technology processes.
Above all, the two most common types of outsourcing in Southeast Asia are business process outsourcing (BPO) and information technology outsourcing (ITO).
Common business processes outsourced include:
- Customer Support
- Technical support
Across all industries, BPO solutions provide great opportunities to save money and increase growth. Other benefits of BPO include controlling labor and capital costs, increased efficiency, more agility, lower risk, and the ability to keep their focus strictly on their core business — which can lead to greater success in the long run.
Under the BPO umbrella — but a very large industry in its own right — is ITO.
Information Technology Outsourcing
Outsourcing Insights reports that, per Deloitte, 31% of global IT services were outsourced in 2017.
Common information technology processes outsourced include:
- Application development maintenance and support
- Datacenter operations and administration
- Help desk and desktop support
- Network operations and IT security
- Web hosting and operations
Let’s take a closer look at BPO in SE Asia, in the place most known for it — the Philippines.
Outsourcing Opportunities in the Philippines
A vast amount of global BPO goes to the Philippines, with work in customer service, accounting, and data entry flowing to the island nation’s English-fluent workforce. By 2022, The Manila Times predicts that BPO in the Philippines will consume 15 percent of the global outsourcing market — and grow 9% annually.
With the Philippines’ emphasis on digital infrastructure and welcoming government regulations, telecommunications industry businesses need to look no farther when it comes to finding great outsourcing opportunities — 21 of the top 25 call centers are located in the region.
Forecasts of continued growth in BPO are partially due to the increasing number of call centers needed by businesses — an item that is most cost-effective to be sourced overseas, particularly in SE Asia. In the Philippines alone, there are 1.15 million call center employees — with that number expected to grow to 1.8 million by 2022.
How Emerhub Can Help
Outsourcing in the Philippines presents a terrific opportunity due to its available, educated, English-proficient workforce; low costs; and the presence of Emerhub.
Emerhub offers several BPO services in the Philippines, for instance:
- Accounting and Tax Reporting – We will handle everything regarding accounting and tax reporting on your behalf.
- Due Diligence – Instead of doing research and finding suppliers on your own, we take care of market research, and information collection to help you determine future business prospects, and find the right suppliers.
- Employer of Record – We recruit a person or a team who will work for you in the Philippines.
- Importer of Record – As your importer of record, we will import your products to the Philippines using our import licenses.
Now that you understand how to handle BPO in the Philippines, let’s talk about a powerful way to use outsourcing to explore new markets.
Let’s talk about strategy. How do you use outsourcing and EoR to easily expand your business internationally, particularly in a rapidly growing market like SE Asia?
We’ve previously discussed a lean strategy for growing your business in emerging markets. Taking that into consideration, here’s a strategy with an outsourcing twist.
To rapidly expand into new markets in SE Asia, do the following:
- Use an EoR to hire salespeople in the regions you’ve identified as promising.
- Get those “boots on the ground” to test out the market and determine if it is ripe for expansion.
- If sales are forthcoming, use an IoR service to get your products imported with ease.
- Once things are going well, then you can expand aggressively and register your company.
This method has little risk and many benefits, including tax relief, lowered risk and increased opportunity.
A legal entity setup is necessarily not the fastest or easiest way to grow your business in a new country. The global explosion in outsourcing makes it easier than ever to enter into new markets. You can expand your business internationally and focus on your core business.
Convenient, affordable, and legal, EoR represents a strong opportunity to grow your business through outsourcing. Companies who wish to continue competing in the global marketplace can benefit from efficiency, savings, and new opportunities in outsourcing.
You can quickly and affordably branch out and test new markets — starting small and getting bigger later.
Emerhub is an Employer of Record service provider. Want to learn more about expanding your business in SEA with the help of Emerhub’s EoR services? Simply fill out and submit the form below — or get in touch with Emerhub via email[email protected].
Your first appointment with one of our international business experts at Emerhub is complimentary.
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