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Outsourcing to South East Asia: The Top 5 Countries

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Chinese and Indian tech giants have dominated the outsourcing industry for years. Now the pool of skilled offshore workers in Southeast Asia is unmatched anywhere else in the world. Outsourcing industries here have shown resilience despite the turbulence of the global economy over the past two years.

It’s no longer just information technology and customer service, but other fields such as automation, digital business processes, healthcare, and manufacturing that contribute to the growing popularity of outsourcing in Southeast Asia.

The region is seeing an increase in the number of new businesses and entrepreneurial endeavors due to the flourishing tech industry, and some Southeast Asian countries are making a mark in these fields.

SEA: Low-cost and effective outsourcing

For low-cost outsourcing, many companies look to Asia. It offers competitive benefits to western businesses, including:

  • Language: Outsourcing partners in Asia are fluent in English, written or verbally. The appeal is not having a language barrier in getting projects underway and accomplished.
  • Workforce: There is a sizable pool of talent in Asia that spans both mature and nascent technologies.
  • Timezone: Employees in Asia work on the project during business hours, when most consumers and employees in the West time zones are sleeping.Your teams in Asia can accommodate your requested time zone overlap. Time management is especially important when working with a diverse team of people from different locations and experiences.

The Top 5 Southeast Asian Countries for Outsourcing

The Philippines has been an outsourcing powerhouse since 1992, when most other countries were just getting started. Nearly 1.2 million people are employed in the Philippines’ thriving outsourcing sector, and that number continues to rise each year.

Housing hundreds of outsourcing companies, Business Process Outsourcing (BPO) is one of the fastest-growing industries in the Philippines with an expected annual growth rate of 7% to 9%, higher than the expected global growth.

A culture that is used to outsourcing has more professional and welcoming attitude toward your business.

Common roles outsourced:

  • IT Support
  • Web development and design
  • Customer service
  • Data entry
  • Content creation
  • Human Resources
  • Finance and accounting
  • Marketing/advertising
  • Virtual assistance

Reasons to outsource to the Philippines:

  • Strong cultural affinity: Companies that want to maximize their productivity through outsourcing often look to the Philippines because Filipinos are so similar to Westerners, already familiar with their culture and jargon. Filipinos adapt to Western business operations fast.
  • First-rate English skills: After its fellow Southeast Asian country of Singapore, the Philippines has the second-highest English proficiency in the entire continent of Asia. In light of this, they are an attractive outsourcing option for Western nations.
  • Data security: There are stringent data privacy rules and regulations in place in the Philippines to deter cyber attacks. By protecting personal information, the Philippine Data Privacy Act of 2012 makes it possible for businesses to outsource without fear of legal repercussions.
  • Low outsourcing cost: The Philippines is an affordable option among Southeast Asian countries. Web development projects start at $18 per hour. Graphic design ranges from $5 to $20 per hour, although rates always depend on skills and experience, and complexity of the project.

2. Vietnam

Vietnam is a fast-developing country with a robust economy and considerable outsourcing potential. Unlike other outsourcing countries such as the US and India, Vietnam is nowhere near as expensive– still considered a hidden gem.

Vietnam has a stable economy and remains one of the most resilient countries in the world, with a 2.9% growth rate in 2020 despite the global pandemic.

Vietnam’s low prices, economic growth and dedicated people are only a few of the reasons why many companies have started outsourcing there.

Common roles outsourced:

  • IT support services
  • Software development
  • Application development
  • Finance and accounting
  • Payroll outsourcing
  • Human Resources

Reasons to outsource to Vietnam:

  • Advanced education: Each year, more than 280,000 Vietnamese students graduate from high school or college. The literacy rate in the country as a whole is above average, around 95% for citizens aged 15-35.
  • Growing youth population: More than 50% of Vietnam’s population is under the age of 35. In contrast, 45% of the population falls into the prime working age range of 15–35. The country’s young, skilled workforce makes it a prime location for outsourcing of all kinds, including IT.
  • International Business and Finance: Other global corporate investors have also outsourced to Vietnam. Companies like Canon, IBM, and Fujitsu are already playing larger roles in the country’s IT industry.
  • Efficient labor force: The Vietnamese workforce is an asset in global competition because of its high quality and dedication to work. Young people are widely hailed for their drive, creativity, and tenacity. They have one of the highest labor participation rates in the world which is 74.4%.

3. Indonesia

Indonesia’s business climate, low costs, online presence, people skills, and workforce availability make it an appealing global business outsourcing location.

There are 129 million working citizens in the country and 44% are employed in services, one of the two largest sectors alongside agriculture. Indonesia is considered the ‘new tiger of Southeast Asia’ with the potential to acquire rapid economic growth.

Common Roles Outsourced:

  • Payroll services
  • Back office functions
  • Voice over outsourcing
  • Virtual Assistance
  • Customer service
  • Project management

Reasons to outsource to Indonesia:

  • Free trade agreements: Due to its membership in ASEAN, Indonesia enjoys duty-free or low-tax trade with nine other countries in the region. Trading partners for Indonesia extend beyond the ASEAN such as India, China, South Korea, Japan, Australia, and New Zealand.
  • English as official business language: While Bahasa Indonesia is the official language, Indonesia’s business language is English. Foreign business owners can communicate with Indonesia’s pool of talents with fewer language barriers.
  • Growing middle class: As more Indonesians enter the middle class, there will be a greater demand for high-end goods and services to satisfy their growing disposable incomes.
    Foreign companies hoping to expand their presence in Indonesia can take advantage of the country’s rising demand and shopper culture.
  • Digital capabilities: Indonesia has the largest and fastest internet economy in Southeast Asia. It is ranked fourth among countries who have developed a capable workforce to operate within new technologies and digital business environments.

4. Thailand

Thailand is the second largest economy in Southeast Asia. The country recently devoted itself to being an IT leader. Thailand envisions the future as a fully automation-driven economy.

You can get a leg up on the competition in this data-driven market by taking advantage of the country’s ambitious plans to build smart cities, placing a premium on creativity and technological advancement.

Common roles outsourced:

  • IT
  • Human Resources
  • Payroll management
  • Financial accounting
  • Manufacturing

Reasons to outsource to Thailand:

  • Strategic location: Thailand serves as a jumping-off point for trade with Asia, the world’s most dynamic economic region. Because of its strategic location, it is often chosen as the first stop for overseas firms exploring opportunities in Asia. The country reaches almost 4.6 billion Asian consumers– a perfect point of investment for Western countries.
  • Funding for international enterprises: Thailand is funding smart city developments. A $45 million budget has already been allocated to the creation/development of human resources, modern logistics, and smart cities. They highly encourage private investments on automation and new technologies.
  • Stabilized economic growth: Thailand went from low-income to upper-middle-income in just 40 years. The Thailand 4.0 20-year plan adopts a ‘growth via innovation’ strategy, focusing on a value-based economy driven by creativity, new technologies and digital innovations.
  • Ease of doing business: Thailand ranks #5 in Asia, and #21 among 190 countries in the World Bank’s Ease of Doing Business Index. It’s because they provide seamless registrations for new businesses, serve reliable electricity, and continuously amend regulations to match changing market conditions.

5. Malaysia

The IT, logistics, and energy sectors are just a few of the many provided services by the Malaysian outsourcing industry. It is making its mark in the fiercely competitive Asia-Pacific region, which includes global outsourcing hotspots like India, China, and the Philippines.

Malaysia ranks #25 on the IMD World Competitiveness Index (2020), an index that ranks countries based on their competency to obtain long-term value creation.

Common roles outsourced:

  • IT functions
  • Business and knowledge processes
  • Energy and logistics

Reasons to outsource in Malaysia:

  • Digital economy blueprint: Digital Free Trade Zone (DFTZ) connects Malaysian SMEs with global buyers and sellers. It is the first electronic world trade platform outside China. DFTZ aims to maximize Malaysia’s dynamic Internet ecosystem to attract both local and foreign businesses.To protect individuals and businesses, Malaysia has strong cybersecurity and IP laws alongside the Philippines. The country has some of the strongest IP laws in Southeast Asia.
  • Conducive business policies: Foreign investment in Malaysia is subject to few, if any, restrictions. The government of Malaysia’s pro-business policies are largely responsible for the country’s rise to prominence as an outsourcing hub. Their National Development Policy and National Vision Policy ensures that both local workforce and global businesses receive equal opportunities in economic activities.
  • English proficiency: Both the current (2021) and the previous governments of Malaysia have taken steps to raise students’ English skills. The Malaysian education ministry launched English Language Education Reform, a 10-year plan (2015-2025) that aims to improve English teaching and learning.The ongoing reform produced good results as Malaysia is now ranked third in the APAC (Asia Pacific) region on the English Proficiency Index (2020), just behind Singapore and the Philippines.

Solving the potential challenges to outsourcing in Asia

  • Time zonesThe majority of Western nations are in different time zones from their Asian counterparts.Setting out a clear project management and communication please using project management apps, email, instant messaging (e.g. Slack) and video conferencing remove time zone and offshore team challenges.Streamline the process by including language in your outsourcing agreement outlining the parameters for how often and in what format project updates will be provided.Adopting a “follow the sun” model which takes advantage of the time zone disparity by extending the working day around the clock, can help provide the necessary overlap in availability.
  • Service LevelsThere are many upsides to outsourcing, but it’s only worthwhile if the final product meets your standards. When a remote, offshore team operates independently from you, it’s not always easy to tell.Address this by being specific when outlining your needs for the project. Make sure your expectations are clear and shared with any potential outsourcing partners.
  • Tracking and productivity managementProject management software helps organize weekly tasks and boosts productivity – it creates a centralized and searchable history of projects and tasks.Use screen monitoring software to check their performance, and use it in a positive, productivity enhancing way, not to punish or micromanage.Instant message communication tools – Slack, Microsoft Teams – help teams communicate quickly and are very effective for quick updates and general conversation, when used in conjunction with project management apps.
  • CybersecurityWhenever a company uses an outside outsourcing company, that company gains access to sensitive information like product prototypes, business policies, client databases, etc. There’s a risk of security breaches and information leaks.Outsourcing companies can make their clients feel safe through NDAs and Service Level Agreements (SLAs). Data Processing Agreements (DPAs) that specify data storage, processing, and transfer policies can also be included.Thus, you can confidently outsource crucial services without fear of sensitive data being compromised.

Closing thoughts

There are many advantages with outsourcing to South East Asian (SEA) countries. The top performers are skilled and experienced in helping businesses accelerate growth, with contributions from accommodating governments.

And right now they are not only cost-effective, they also have the edge to compete with other big outsourcing hotspots with their ongoing economic growth, digital capabilities, and new strategies.

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