Outsourcing to Asia: Top 5 Countries, Benefits, and Drawbacks

Asia is a major player in the global outsourcing industry, home to leading countries that offer top-notch services at significantly lower costs.

This is likely why international companies like Nike, Amazon, and Google often choose to outsource to Asia rather than to closer regions like Latin America and Eastern Europe.

In this article, we’ll examine outsourcing services in five Asian countries and provide three reasons to consider each one. We’ll also touch on three potential downsides of outsourcing and how to address them.

Let’s get started.

When considering outsourcing to Asia, it’s essential to look at the entire Asia-Pacific (APAC) region.

This region includes countries like:

• China
• Macau
• Hong Kong
• Taiwan
• India
• Indonesia
• Japan
• Malaysia
• Nepal
• Singapore
• South Korea
• Sri Lanka
• Thailand
• The Philippines
• Vietnam
• And many more.

In this guide, we will take a closer look at five key outsourcing destinations in this region.

1. China (East Asia)

China is a dominant force in the global outsourcing market, offering a vast labor force due to its large population.

China’s outsourcing industry is divided into three main categories:

• Business Process Outsourcing (BPO)
• Information Technology Outsourcing (ITO)
• Knowledge Process Outsourcing (KPO)

3 Reasons to Outsource to China:

1. Rapidly Growing Economy
   China boasts the world’s largest middle-income group, attracting numerous foreign investors to its outsourcing market. The country leads globally in Purchasing Power Parity (PPP) and has the second-highest GDP in the world. China produces about 90% of global exports, which contribute significantly to its GDP, making it a leading global supplier.
2. Innovation Capabilities
   China ranks 7th globally in digital resonance, which measures how well companies adapt to digital transformation, particularly in cybersecurity and automation. This high ranking indicates that outsourcing IT and software services to China is a secure and reliable option.
3. Supportive Government Policies
   The Chinese government is gradually loosening restrictions on foreign ownership, especially in the financial sector, to enhance its role in the global economy. The government also offers favorable tax policies and subsidies to stimulate growth in the outsourcing sector.

2. Singapore

India has been a popular outsourcing destination, particularly in the IT industry, since the 1990s. Initially, global airlines outsourced back-office services to company registration in Singapore, which eventually expanded to a wide range of services, including:

• IT services
• Customer support
• Human resources (HR)
• Digital marketing
• Accounting and payroll

3 Reasons to Outsource to Singapore:

1. Low Labor Costs
   Hiring professionals in India is significantly cheaper than in North America or Europe. For example, hiring a software developer in India costs around $401 per month, compared to $1,610 in Poland.
2. High English Proficiency
   While English is not Singapore’s primary language, it is one of the country’s official languages. Singapore ranks 6th in Asia for English proficiency, making communication smooth for businesses outsourcing there.
3. Large Talent Pool
   With a population of 1.4 billion and about half in prime working age, Singapore has a vast and skilled workforce. Annually, around 6.5 million graduates enter the workforce, providing a deep pool of qualified talent.

3. Thailand (Southeast Asia)

Thailand has long been a manufacturing hub in the region. In 2020, its GDP was $501.79 billion, even amidst the pandemic, highlighting the strength of its healthcare, commercial, and industrial sectors. Thailand is also known for its thriving contact center industry.

3 Reasons to Outsource to Thailand:

4. Advancing Technological Infrastructure
   Under the Thailand 4.0 initiative, the country aims to adopt green and smart technologies, offering low-cost options for manufacturing companies in the digital age.
5. Expanding Economic Freedom
   Thailand’s commitment to economic freedom has transformed it into an upper-middle-income country. This environment attracts foreign investments, crucial for the country’s development and growth.
6. Incentives for Private Investments
   The Thai government is heavily investing in innovation-driven industries, offering incentives like tax exemptions and soft loans to encourage private investments in smart technologies and automation.

4. The Philippines (Southeast Asia)

The IT and BPO industry is a major revenue source for the Philippine economy. Services commonly outsourced to the Philippines include:

• Contact centers
• Back-office services
• Data transcription
• Animation
• Software development

3 Reasons to Outsource to the Philippines:

1. Excellent English Language Skills
   English is an official language in the Philippines, and the country ranks 2nd in Asia for English proficiency. This makes it a top choice for companies from Western Europe and North America seeking customer support services.
2. High Literacy Rate
   The Philippines boasts a literacy rate of 98.3%, with many workers holding university degrees in fields such as business, finance, education, and computer science.
3. Strong Data Protection Laws
   The Philippines has robust data privacy regulations, making it one of the more secure outsourcing destinations in Asia.

5. Vietnam (Southeast Asia)

Vietnam is emerging as a key outsourcing destination, thanks to strategic economic policies and market reforms. The ICT sector in Vietnam has been growing at nearly 9.8% annually, contributing significantly to the country’s GDP.

3 Reasons to Outsource to Vietnam:

1. Emerging Middle Class
   Vietnam’s population is expected to reach 120 million by 2050, with a growing middle class that offers significant market potential for outsourcing.
2. Highly Educated and Skilled Population
   Vietnam has a literacy rate of 95.4% and a high labor participation rate. The government has also invested heavily in improving digital skills and technical knowledge.
3. Fast and Stable Economic Growth
   Vietnam’s economy has shown remarkable resilience, even during the pandemic, and is considered one of the fastest-growing in Southeast Asia.

3 Significant Drawbacks of Outsourcing to Asia

While there are many benefits to outsourcing, there are also potential challenges to consider:

1. Different Time Zones
   The time difference between Western countries and Asia can hinder communication and collaboration. Specifying communication protocols in outsourcing agreements can help mitigate this issue.
2. Quality Issues
   Ensuring that the outsourced product meets your expectations can be challenging. Clearly communicating service levels and project requirements, and reviewing the provider’s portfolio, can help avoid quality issues.
3. Lack of Transparency
   Outsourcing can make it difficult to track project progress. Tools like Time Doctor can enhance transparency by allowing you to monitor time spent on tasks, track productivity, and manage payroll based on hours worked.

Wrapping Up

Outsourcing to Asia offers numerous benefits, with each country bringing unique strengths to the table. However, it’s essential to be aware of potential drawbacks and take steps to address them.