Why Setting up Your Own Offshore Office in India is a Waste of Your Time & Money!

Shaunvir Mahil November 07, 2018

If you are thinking of hiring remote employees in a country like India, you may have one of the two mindsets and approaches mentioned herein. The first, (also the most common mindset) is to think purely in terms of resources, wherein, you equate the service or experience of offshoring solely in terms of ‘staff’. For most clients, a remote staffing service starts and ends with the resource, their ‘virtual employee’. For such clients, the remote employee encompasses the entire ambit of the offshoring process; wherein the entire offshore exercise is limited to the resources they work with.

Whilst this is the most common thought process, (I had once told a client, “our office becomes your office,” to which he replied, “I don’t want an office”), it is incorrect. Remote staffing is not only about your remote employees, but also about your remote office. When offshoring, the two must go hand in hand. You cannot have a remote employee without a remote office . If you try to, you will find the experience is akin to hiring an offshore freelancer , (if you aren’t already aware, offshore freelancers have a notorious reputation for unprofessionalism), primarily due to a lack of accountability and supervision. Although at first you might not think there will be a big difference between a VE and a freelancer, (since, a freelancer and a VE are both ‘remote experiences’!). In reality, there is a significant difference between working with an offshore remote resource who works from their home, and an offshore remote resource that works from a supervised office.

The following video provides an insightful summary of the differences between the two: https://www.virtualemployee.com/videos#why-ve).

However, only a minority of clients appreciate the aforementioned. For such clients, offshore office is as important as the remote employees. Such clients understand that a customized branded office is crucial, not only for retention of control and management, but also for ensuring the cultural integration of your offshore team with your local team and company. An offshore office adds value in several respects – be it for reasons such as internal compliance, i.e. ensuring your offshore team follows the same processes or works with the same hardware, or for building rapport, i.e. branding your offshore office as you would do for your local office. A key to successfully hiring VEs, is not only to ensure that you feel like they are a part of your company, but that your VEs feel as though they are a part of your company, too. Hence, for clients with a long-term outsourcing plan, (especially when they are offshoring core competency positions), an offshore office becomes of immense value.

Right Strategy, Wrong Execution

Whilst I applaud the minority of clients who want to setup an offshore office for their VEs, (it shows that these clients are passionately committed to the process , and this is the key to their success), the way most clients go about its execution, is flawed. When such clients approach us (VirtualEmployee.com), with their requirements, some of the clients inform us that whilst initially they wish to hire their Virtual Employees via our firm, they eventually plan to, setup their own offshore office in India. Also, once they do so, they would want to take the VE they have hired via us, over to their office.

When clients inform us of this intention, whilst we are open to the ‘buying out’ of our non-solicitation contractual terms, we become quite perplexed. Don’t the clients realize that they already have an offshore office with us? Why do they want to go through the labor intensive process for setting up something which we already have been operating successfully? What advantages will they gain by trying to going solo? Will such an endeavor not be a complete waste of their time, money and effort?

Thoroughly bemused, we end up asking ourselves questions of the sort.

Advantages of setting up an Offshore Office via a vendor

First, by setting up an offshore office in India via a third party like us, clients retain the benefits of having their own autonomously run offshore office, (we setup and manage the office in accordance with their instructions). At the same time however, it is also a far more cost effective solution than if clients were to do this themselves. This is not only because of our high economies of scale but also because clients have no start up, capital or overhead expenses when they setup an offshore office with us. The ‘offshore office’ portion of our service is free, and it comes as a bi-product of hiring Virtual Employees with us.

The following video demonstrates how it works:

Secondly, the cost of setting up an offshore office in India independently, not only entails overheads, but also means having to deal with considerable red tape and complicates bureaucracy and local laws. This makes going solo a highly frustrating experience for business owners. The bureaucratic red tape in India is so rampant that the very act of incorporating a company here will result in you breaking the law in one form or another (an internal joke amongst our team!). If ‘they’ want to, they will find a way to get to you. Why would any SMB (small to medium sized western businesses) want to entrap themselves with such unnecessary affairs, especially when it can be seamlessly and instantly dodged via a successful association with an established third party vendor? It is a highly counter-productive move.

This is why, large multinational corporations do not go solo, and instead they prefer to partner with vendors in India. It is easier for even Fortune 500 companies to setup an offshore office via a local vendor and avoid getting entangled in the bureaucratic chaos. If powerful corporations are partnering with local vendors to setup their GICs (Global In-house Centres), then is it not slightly odd that some small to medium sized corporations do not want to take this route?

The third key point to keep in mind is with regards to on-going daily management and operations. The time, money and effort involved in setting up an offshore office is only the conclusion of chapter one. Thereafter, once your office is setup, you will have to manage your virtual employees’ daily operations, e.g. HR, accounts, IT, admin, legal, payroll, recruitment, etc. This is not only a further investment of time and finances, it is in fact, an indefinite investment of time and finances. Not only this, but with cultural differences, norms, practices and legislation; western organizations will find it difficult to manage such functions as well as an Indian company would be able to do it. You will end up paying more to get a job done only half as well, and not to mention the added burden you will have to bear for it.

Such a move would end up defeating one of the main advantages of offshoring and hiring remote staff – the streamlining of your operations, (why this is so important and how it helps improve decision making is discussed in the following blog post – How Outsourcing will protect your Will Power and why its so important ). Hiring Virtual Employees enables you to employ staff, retain full control over how they work for and with you; without actually getting involved with the micro-levels of business, e.g. sourcing premises, overheads, infrastructure, HR, legal and IT management. You will still be the decision maker, (if there is any particular way in which you want your staff managed, we will always do so for you!), but at the same time you do not have to waste time and energy in the implementation of those decisions.

This is why offshore outsourcing is such a powerful business step. It enables you to segregate strategy and execution. You will get the results you want, but without having to do any of the legwork. In short, setting up an offshore office independently in India, will only add unnecessary burden on your shoulders. More importantly, this additional work and financial investment will go towards activities that are not mission critical and thus, will add no differentiated value to your business.

The following 50-seconds video shows clients visiting their offshore offices at VirtualEmployee.com and what the entire process looks like for them:

The advantages of this model was also touched upon by Robert Hess, CEO of Paragon Print Systems (in a case study filmed with us in 2015):

The whole concept is having an office outside your office. You can take it anywhere. It is a good concept. We really feel that working with Virtual Employee is an extension of our office. We look at their employees today as our employees. We are working very closely with human resources at Virtual Employee, with the sales department to help us find the right fit of people and understand our needs, and then working directly with the employees, so we don’t see it as a separate office, but really more of an extension of our office.

Conclusion

If you are thinking of hiring remote employees in an offshore destination, keep in mind that it is beneficial to think not only in terms of the resources but also in terms of the office. If you were hiring locally, your local office would be an integral part of your plans. Why should the same not hold true for your offshore employees? If a local office holds value for your local team, your offshore office will add value for your offshore team, too. Also, if you are of this mindset, i.e. you appreciate the value an offshore office brings to your team, then you must also carefully think about the merits of setting up such an office alone versus via a third party vendor. You must ask yourself if setting up your own legal entity in India adds any real significant value to you or if it is simply more effective and efficient to do so via a vendor? Are you gaining any greater autonomy or experiencing greater results by going solo?

A careful analysis of these questions reveals that apart from not being the case, in fact, going alone will actually have a less advantageous experience for you. If you do not ask yourself these questions, you will end up creating a huge amount of unnecessary work for yourself.

On a final note, I believe we must ask to all of the above, ‘why’. Why do most clients not appreciate the value an offshore office brings, but rather equate, (and thus relegate) offshoring to solely that of hiring the remote staff? Why do clients fail to realize that they can have an offshore office without having to setup one themselves? Why do so many clients easily miss these two important points?

I believe it is because, a) there is a significant lack of knowledge and misunderstanding when it comes to offshoring, (the reason for this blog) and b) a lack of investment of time and dialogue by clients. Most clients do not invest the necessary time needed to fully understand the process and value of outsourcing and also are not prepared to have in-depth, detailed dialogue with vendors like us, (preventing us from filling in their knowledge blanks and clarifying any misunderstandings for them). A final takeaway is to appreciate the importance of investing time into the process of offshoring, (something that is a core part of my outsourcing philosophy) as it will not only enable you to make better decisions but will also ensure that you will achieve outsourcing success .

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