COVID-19's Effect on Industries: Harnessing Offshore Outsourcing as a Solution

As this financial year comes to a close in 2023, uncertainty has persisted as the biggest trend of the past two years. Businesses and consumers alike have seen an unprecedented impact on the structure of daily life, with many having reorganised even minor tasks. Social distancing, quarantine, and remote working are all terms that have seen a massive spike in searches on Google Trends over the last 24 months, along with a flurry of queries on how to quickly and effectively enact safety measures in workplaces. In fact, the stress on business owners to adapt and change has significantly increased due to the pandemic and ongoing global liquidity crunch. According to a Gallup poll conducted in May 2023, the overall stress for small business owners has risen to 68% for women and 56% for men, with survival becoming a major issue in industries across the board.

Cash flow issues due to lockdowns and shrinking customer bases have meant that many businesses have exhausted their emergency savings even as the pandemic continues to impact countries across the globe, and the ongoing financial crisis is adding fuel to the fire. Such prominent issues have pushed owners and managers towards reimagining business ways, moving away from preconceived notions of stability.

However, one industry that saw a surge in opportunity in 2023 is offshore outsourcing, particularly when it comes to the boom of activity around software development and shifting to online platforms. Many offshore outsourcing companies have faced the devastating blow Covid has dealt to workforces and productivity. However, others are getting ready to take advantage of a globally linked, internet-heavy market in need of offshore support.

The pandemic's impact on industries has been diverse, with some sectors struggling to survive while others find new avenues for growth. Offshore outsourcing is stepping in to alleviate the ever-growing stress businesses are under in a world that has become obsolete in its brick and mortar approach. This trend highlights the importance of adapting to changing circumstances and embracing technological solutions to sustain and thrive in the face of adversity.

In the midst of all the uncertainty, businesses are discovering that innovation and flexibility are key to survival. Offshore outsourcing, once seen as a cost-saving measure, is now being recognized as a strategic move to stay competitive in a rapidly changing landscape. By leveraging the expertise and resources of offshore teams, businesses can navigate the challenges of the pandemic and the financial crisis more effectively.

What makes offshore outsourcing particularly enticing in this current climate is its ability to provide a global talent pool at a fraction of the cost. As companies reassess their budgets and look for ways to cut costs without compromising quality, offshore outsourcing becomes an attractive option. Moreover, the shift to online platforms and the increasing reliance on digital technologies have created new avenues for collaboration, making it easier than ever to work with offshore teams seamlessly.

However, it's important to acknowledge that offshore outsourcing is not a one-size-fits-all solution. Businesses must carefully evaluate their needs, establish strong communication channels, and ensure cultural compatibility when working with offshore partners. Transparency, trust, and a shared commitment to success are crucial for building effective relationships in the offshore outsourcing landscape.

As we move forward into a post-pandemic world, the resilience and adaptability of businesses will be tested. Offshore outsourcing presents an opportunity for companies to not only survive but also thrive by embracing new possibilities and leveraging global talent. The uncertain times we face demand bold and innovative approaches, and offshore outsourcing is proving to be a strategic move for businesses willing to seize the moment and rewrite the rules of success.

What is outsourcing?

Outsourcing, also known as Business Process Outsourcing (BPO), is a business practice where services or certain job functions are delegated to a third party. Examples of outsourcing include HR, payroll, software development, IT, finance, manufacturing, customer service, business development, sales, and marketing. Essentially, a company can outsource any internal process that is deemed non-essential or not directly related to its core operations. Offshore outsourcing follows a similar concept but involves contracting services to companies in different countries than where the client business operates. Offshore outsourcing offers advantages such as lower costs, particularly in developing countries, and the potential to leverage varying COVID regulations, which can benefit countries like the UK that have strict lockdown guidelines. Contrary to the depiction of stereotypical offices with foreign workers adopting American accents to appease disgruntled customers, the outsourcing sector has experienced significant growth in recent years. In fact, the global outsourcing market was valued at $302.6 billion in 2023.

However, to grasp the role of offshore outsourcing in a post-COVID environment, it is crucial to understand the changes that various industries have undergone since the virus became an inevitable part of life.

What are the effects of COVID-19 on major industries?

Retail

The retail industry has faced significant challenges due to the extensive lockdowns implemented globally, particularly in the USA and UK. To adapt and survive, retailers have had to quickly pivot their strategies. The rise of online stores has been instrumental in sustaining businesses deemed non-essential, sometimes becoming their sole sales channel. Additionally, with people confined to their homes, online shopping has emerged as a popular activity during quarantine. In 2023, online retail sales reached a record high, with global e-commerce sales surpassing $4.9 trillion.

Remarkably, Amazon, one of the world's largest online retailers, experienced a staggering $570 billion increase in market capitalization in 2020 alone. Consumer spending on Amazon's platform also witnessed a 60% surge from May to July in 2020. These figures reflect the growing popularity of online retail and the urgent need for businesses to reduce costs while physical stores remain empty.

Consumers, grappling with financial insecurity, have turned to stimulus checks as a top search trend on Google. Due to their price sensitivity, consumers primarily prioritize value when making repeat purchases or trying new brands. This has led to a significant rise in Buy Now Pay Later apps, allowing users to defer payments for items during financially uncertain times. As of September 2020, these applications were downloaded approximately 1.4 million times. Retailers that integrate such payment options into their platforms can foster customer loyalty and achieve improved conversion rates at a faster pace.

The growth of the online market and a shift towards value-based purchasing have intensified competition in the retail industry. It has become crucial for retailers to stand out from the crowd. Many retail firms are focusing on creating differentiated and personalised online experiences to compensate for the absence of physical stores. This increased emphasis on innovation has become a pressing need across the industry.

Healthcare

Access to proper healthcare is more critical than ever, leading many countries to thoroughly evaluate their healthcare systems. With the fear of visiting contaminated hospitals persisting, patients are increasingly opting to contact their medical providers through telephone or the internet. As a result, the demand for E-clinics has significantly risen. In the US, consumer adoption of telehealth methods has skyrocketed from 11% in 2019 to 46% in 2020, with more consumers using these services as a substitute for traditional doctor's visits. Talks with E-clinic software companies indicate a 50% increase in interest in online platform usage and development. However, a major challenge lies in the lack of available technical teams to assist hospitals and companies in integration.

Furthermore, the demand for pharmaceuticals had already been rapidly increasing before the pandemic but escalated further during COVID-19. The local capacity of manufacturers is unable to keep up with the growing demand, resulting in a steady growth in pharmaceutical offshore outsourcing. The growth of the pharmaceutical outsourcing market is directly related to key developments in drug development. Once a drug is approved, patented, and progresses towards the generics category, the demand for the drug continues to increase. Pharmaceutical offshore outsourcing ensures optimal drug manufacturing to meet the overall market demands. In the face of a common enemy in the virus, there is a need and demand for greater cooperation in the healthcare sector globally.

Another area of expansion in the healthcare sector is the use of AI to replace manual operations. The spread of COVID-19 has emphasised the need to limit human contact wherever possible. As hospital admissions increase, the use of AI in record keeping has become more crucial. For instance, NCS implemented a Robotic Process Automation (RPA) solution to automate the admission, discharge, and transfer of patients at the Community Care Facility (CCF) located at the Singapore Expo, which aided in the recovery of COVID-19 patients with milder symptoms. Previously, these tasks were performed manually. The RPA solution improved operational efficiency at the CCF, indirectly benefiting the patient experience. However, many hospitals lack the necessary updates and infrastructure to incorporate AI into their internal structures on a long-term basis, leading to a lag in development and missed opportunities. Flexibility is crucial in the healthcare system to address unprecedented and rapid healthcare challenges like the global pandemic. Additionally, data collection and research needs have rapidly increased to meet the demand for national and international statistics on the impact of COVID-19.

However, budgets for healthcare expansions are scarce in many parts of the world due to resource constraints and increased pressure on the industry. The underfunded NHS in the UK, for example, has struggled to meet the demand. Additional funding pressures in 2021/22 amount to £40 billion or 2% of pre-COVID GDP, and £10 billion (around 0.5% of GDP) by 2023/24. The short-term costs of the pandemic have significantly increased public borrowing, pushing the UK's debt-to-GDP ratio above 100%. Consequently, offshore outsourcing has been adopted as a cost-saving measure, particularly in the US, where the healthcare outsourcing market was valued at $52.9 billion in 2020 and is projected to reach $66.3 billion by 2025.

Education

Across the globe, schools continue to face closures or operate primarily through online platforms. With classes being conducted via platforms like Zoom and Google Classroom, more than 1.2 billion children are no longer attending physical classrooms. Recent search trends on Google indicate increased interest in online learning platforms such as 'korki tv' in Poland and 'smartschool' in Belgium, 'distance learning' ('למידה מרחוק') in Israel, 'maths tutor' in the UK, 'home schooling' in Germany, and searches for 'online exam' ('online sınav') and 'software training' ('yazılım eğitimi') in Turkey.

The rise of distance learning has led to the emergence of new avenues for education through online courses. Many individuals have pursued online qualifications during quarantine, both out of necessity and as a hobby. Furthermore, with the increase in unemployment, people are acquiring additional qualifications online to gain a competitive edge in the job market. As a result, online learning platforms have adjusted their pricing strategies, leveraging the advantages of lower overhead costs to make education more affordable and accessible on an international scale. The COVID-19 pandemic and the growth of online education have also inadvertently created opportunities for a global teaching force, allowing teachers to work remotely from any part of the world, irrespective of their geographical location. English teachers have particularly benefited from this lucrative opportunity, as platforms dedicated to their profession have emerged worldwide.

Consequently, the proliferation of online platforms has necessitated the redesign of the teaching experience and the innovation of software that can replicate the conventional model of schooling. In this expansion, there has been a significant demand for software solutions that incorporate features like online communal whiteboards and class progress tracking systems. Schools and universities, concerned about low student turnout and declining enrollment rates, have devoted more effort to enhancing their online platforms. Consequently, individuals of all age groups are being exposed to and rapidly developing technological literacy. Students, teachers, and parents are expected to adapt to technology at an accelerated pace, with platforms like Google Classroom introducing nearly 50 new features with each major update. This adaptability is likely to remain crucial and highly necessary.

What does this mean for the future? Well, it suggests a continued shift towards a more digital economy and communication, along with a workforce that is increasingly tech-forward. Moreover, it implies increased public expenditure on technological infrastructure. According to Jane Coffin, a senior vice president for internet growth at the Internet Society, governments and organisations are now spurred by an "unbelievable call to action" to promote global connectivity. As a result, projects in developing countries are underway through organisations such as the UN or private entrepreneurship. For example, in Kenya, high-altitude balloons are delivering internet service to citizens across a 31,000-square-mile area, thanks to a partnership between a unit of Google's parent company and a local web carrier. Meanwhile, Pakistan has commenced 5G trials and established data centres in Karachi, Lahore, and Islamabad to enhance the nation's communication infrastructure and expand internet access to a larger portion of the population. Overall, these initiatives indicate that online learning's scope and complexity will continue to grow globally. Additionally, they suggest that developing countries have an even more promising future in the tech industry, serving as a viable sphere of cooperation between firms across the globe.

Film

In the realm of film, it is essential to clarify the terms for this blog, focusing on the animation industry and the shifting landscape of Hollywood from traditional cinemas to streaming platforms like Netflix, HBO, Hulu, and others. The COVID-19 pandemic has significantly disrupted major film studios in Hollywood, leading to production shutdowns in the US, Canada, and the UK. While production has gradually resumed, it has been slower than anticipated, resulting in substantial delays in the release of major blockbuster projects such as the new Bond film and Mission Impossible 7, and causing a stagnation of future projects in development.

However, this challenging period has provided an opportunity for global film production firms to attract international clients who face difficulties in on-site shooting due to ongoing travel and safety restrictions. These companies are engaging local talent and contracting film crews from various regions, enabling smoother operations on the ground. One notable example is NEEDaFIXER, a global production house that has experienced a surge in demand for its film production services abroad. With a presence in over 100 nations across six continents, the company supports film teams, directors, DPs, and editors, contributing to time-critical productions such as ad shoots, promos, corporate videos, TV series, and raw news gathering.

Animation, on the other hand, has encountered fewer challenges during the pandemic due to the prevalent practice of offshore outsourcing. Production houses have established a solid foundation for outsourcing a significant portion of animation and VFX work to Asian countries, while retaining core aspects such as storyboards and writing in their home regions. The global animation outsourcing market is projected to exhibit a compound annual growth rate of 6.40%, reaching approximately US$191.985 billion by 2024, compared to US$132.338 billion in 2018. Blockbuster hits like Turbo, Despicable Me, Kung Fu Panda, and The Secret Life of Pets have all successfully utilized animation outsourcing overseas.

The COVID-19 situation has prompted firms to further leverage existing structures and embrace remote collaboration, facilitating intercultural exchanges within the industry. Notably, the anime industry has achieved significant prominence, becoming one of Japan's largest and most well-known exports, dominating airtime in the US and beyond.

Viewing habits have also undergone transformation, with the allure of the traditional big screen diminishing as audiences increasingly prefer the convenience of consuming content from the comfort of their homes. In response, streaming platforms like Netflix have assumed a pivotal role in distribution and production. With a vast library of over 1500 original productions from various countries including India, Korea, the US, UK, Germany, and more, these platforms have gained significant traction. Although the production landscape faced setbacks during the pandemic, platforms like Netflix have been able to navigate the lack of new content by capitalising on countries with more relaxed restrictions and relying on existing content to sustain viewership until production can resume more fully.

However, traditional production houses have encountered challenges, either by securing distribution deals with online platforms or by implementing budget cuts and even cancelling entire projects. Major production houses like Warner Bros. have witnessed a substantial decline in the number of movie releases. The global film industry incurred a revenue loss of approximately 7 billion U.S. dollars as of March 2020 due to the pandemic's impact on various sectors worldwide. With theatre closures, postponed movie premieres, cancelled screenings, and closed box offices continuing to affect the industry, the movie industry could potentially face an additional ten billion dollars in revenue loss if the economic effects of the pandemic persist.

Information Technology

The IT industry has proven to be resilient during the COVID-19 pandemic, even experiencing growth in certain areas. However, its success and persistence have largely relied on the technology and infrastructure in its home countries. Initially, India faced strict lockdowns that impacted the IT industry due to a lack of remote working facilities. This led to job losses and reduced productivity as employees struggled to maintain their work activities from home. Furthermore, the global slowdown in recruiting resulting from the crisis has affected the pipeline of skilled workers, with increased job vacancies and fewer hires taking place. However, as the situation improved, India's IT industry bounced back, and the base of digitally skilled IT employees in the country continued to grow.

In 2023, the IT industry witnessed a surge in global opportunities as various measures shifted businesses online. The "work from anywhere" mentality, coupled with budget cuts across companies, has fueled the interest in offshore outsourcing. According to a recent report by Goldman Sachs, major crises have historically led to an increase in outsourcing and offshoring, particularly in India. From 2017 to 2019, the base of digitally skilled IT employees in India grew at a compound annual growth rate of 37%. The report suggests that the top five Indian IT service providers are expected to grow at an average rate of 12.6% in FY22, surpassing earlier estimates of 9.7%.

The COVID-19 pandemic disrupted the traditional IT event landscape, with many international gatherings and conferences being cancelled or postponed indefinitely. This includes events like the Mobile World Conference, Game Developers Conference, and others, impacting business opportunities and networking capabilities for IT companies. However, the industry adapted by organising virtual conferences and events, allowing for continued knowledge sharing and networking.

The shift towards online platforms for various sectors, such as clothing stores, schools, and essential grocery items, has resulted in increased activity in the software development sector and the online and telephonic customer support industry. This has further emphasized the importance of the IT industry in connecting businesses with customers and establishing B2B networks.

The issue of cybersecurity has become even more pertinent in the digital age. The FBI has reported a significant increase in complaints about cyberattacks, with as many as 4,000 complaints per day, representing a 400% increase since the start of the pandemic. This underscores the need for individuals and businesses to prioritize information security and safety when using online platforms. Developers and IT professionals play a crucial role in addressing cybersecurity risks, utilizing their skills to drive innovation and create a safer online experience.

Moreover, there is an increasing demand for top developers and engineering talent as companies seek business solutions to address remote work, social distancing, and the need for in-store alternatives. Integrating cloud computing and replacing outdated hardware have become essential components of streamlining business processes. This has led to a rise in demand for developers on a project-by-project basis and the retention of teams to monitor issues and address errors promptly.

How Outsourcing Can Help Alleviate Issues Caused by COVID-19

Amidst the ongoing challenges posed by COVID-19, businesses and institutions are still grappling with the influx of new technologies, shifting needs, and transformations from traditional business models. The ability to adapt is crucial for companies dealing with cash flow issues, the need to redefine consumer connections, and the reestablishment of core business activities in the face of a global crisis that affects all aspects of operations. As the future remains uncertain, it is increasingly evident that the impacts of the past will shape a "new normal" rather than a temporary disruption. In this context, offshore outsourcing emerges as an indispensable aspect.

Embracing Remote Work for Higher Productivity

The current climate has accelerated the transition to remote work as the new standard for maintaining productivity. In-person work is losing relevance, and the viability of global teams is increasing at a rapid rate. In fact, as of 2023, remote work has become the norm for many organisations, with a significant number of employees working remotely. This shift has prompted managers and business owners to develop motivational HR theories tailored to a business model that relies on global teams. The experience gained by multinational corporations in dealing with international teams and outsourced contracts prior to the pandemic has proven beneficial. However, in a post-COVID-19 environment, businesses of all sizes, including big multinational corporations, medium-sized enterprises, and small businesses, have had to adapt to remote work. Virtual teams have become essential, dispelling outdated stereotypes against offshore outsourcing. The distance no longer implies distrust, as companies understand the value and efficiency that spread-out and independent teams can bring. In fact, Mark Zuckerberg, the CEO of Meta (formerly Facebook), anticipates that by 2030, more than 50% of Meta's workforce will be working remotely. This projection highlights the growing trend towards remote work and underscores the increasing importance of global teams in today's business landscape.

Increasing Flexibility

Flexibility remains a key factor for the survival and growth of businesses in the future. Offshore outsourcing enables firms to create a pool of additional funds by eliminating expenses associated with managing local resources, thereby facilitating growth and innovation. The offshore outsourcing model reduces costs by eliminating the need to hire or train new employees. Moreover, having access to a large pool of outsourced "on-demand" talent allows companies to rapidly scale their workforce without increasing overheads. As of 2023, the offshore outsourcing trend has gained further momentum, with businesses utilising existing talent more effectively to maximise the potential of their current workforce.

Decreasing Costs While Improving Quality

Over the past 40 years, the offshore outsourcing sector has evolved significantly. While cost reduction remains a consideration, the focus has shifted from solely price estimation to the holistic addition of quality and value to output. In the post-COVID landscape, businesses are increasingly recognizing the diverse benefits of offshore outsourcing beyond direct cost reduction. External teams specializing in areas such as AI enhancements in the healthcare sector or retail platform development bring expertise and experience that businesses may not possess in-house. Offshore outsourcing provides avenues for customized features, app integrations, and specialized expertise, all of which can significantly enhance a company's competitiveness in highly competitive online markets. As of 2023, the demand for offshore outsourcing continues to grow, with businesses seeking outsourced developers who closely align with their production and output needs. For example, with mobile devices dominating online shopping, having developers specializing in mobile application design and usability becomes crucial for retail businesses aiming to increase conversion rates. Additionally, offshore outsourcing offers an agile path to success for small businesses, enabling them to differentiate themselves and compete with larger chains by providing cost-effective services without fixed terms.

Diversification through Multi-sourcing Models

Offshore outsourcing models are evolving to meet the changing demands of businesses. Organizations are increasingly moving away from single-source models for critical functions and adopting multi-sourcing from vendors across different geographic locations. As of 2023, diversification through multi-sourcing has gained prominence, offering greater resilience than what in-house or single-sourced teams can provide. The ability to switch between contractors ensures uninterrupted service delivery, especially in the face of local lockdowns and shutdowns. Moreover, diversification allows firms to distribute projects and tasks, minimising the risk of delays or faulty submissions. The offshore outsourcing industry has witnessed an unprecedented rise in deals as a strategic response to overcome local disruptions, with providers leveraging additional help to maintain continuous service delivery throughout 2023.

Less Barriers to Entry

Improved internet access and increased investment in technology and communication infrastructure have further facilitated the growth of offshore outsourcing. Countries worldwide are focusing on raising their agility, and offshore firms are better equipped than ever to outperform local counterparts in terms of speed and support. This trend is projected to continue, with the offshore outsourcing industry expected to grow steadily in the coming years. As of 2023, offshore outsourcing firms are experiencing fewer barriers to entry, leading to increased competition. Consequently, there is a greater emphasis on providing the best quality of work, innovative services, and specialised expertise such as optimised data collection and market analysis. Notably, the pharmaceutical outsourcing industry has seen significant interest, particularly in studying active pharmaceutical ingredients in isolation. Robust pharmaceutical industries that rely on subsidiary research, development, and manufacturing organisations have facilitated the expansion of the market.

Instilling Cultural Diversity in Business Processes

Offshore outsourcing continues to play a major role in guiding business development and success from a cultural perspective. With the rise of the global e-commerce economy, businesses have the opportunity to expand internationally and enter foreign markets that were once inaccessible. This growth potential extends even to small-scale businesses. However, understanding the needs and preferences of foreign markets requires local input. Offshore outsourcing in host countries provides a viable mechanism for gaining insights into personalised tastes and cultural perspectives, which are crucial for creating product lines and establishing brand images. Furthermore, offshore outsourcing fosters cultural exchange through global partnerships, offering a cost-effective means to establish links and networks.

At COSMO Inc., our globally dispersed team across different countries is equipped to provide offshore services filled with unique ideas through a diverse workforce. We understand the current dynamics of the outsourcing landscape in 2023 and can assist businesses worldwide in enhancing their digital presence and focusing on their core products and services.

Conclusion

In recent years, offshore outsourcing has become an integral and increasingly vital component of numerous industries, and its significance is expected to continue expanding in the foreseeable future. The COVID-19 pandemic has introduced a new dimension of dynamism that businesses must embrace, and offshore outsourcing has emerged as a well-established and profitable solution.

As the landscape of offshore outsourcing evolves, the dynamics of major tech hubs are undergoing transformations. Countries that successfully adapt to the digital realm are likely to have a competitive advantage in the outsourcing market. Consequently, businesses find themselves in a state of transition, balancing on the edge between survival and transformation. They must navigate the challenges posed by cybersecurity risks, heightened online competition, contracting markets, and cash flow constraints. Embracing offshore outsourcing becomes crucial for some enterprises seeking to remain profitable amidst the perpetual uncertainties of the current era.