The 5 best countries for outsourcing in 2023 include tried-and-true solutions and some new regions, each with its own pros and cons.
Here's what you need to know:
- The best country for outsourcing IT and software jobs is Poland, and the best country for outsourcing manufacturing is China
- The best country for outsourcing HR and compliance is the U.S.
- The top country for outsourcing customer support is Mexico, and the top country for outsourcing marketing tasks is the Philippines
Outsourcing is nothing new—but with sluggish supply chains, many companies are looking to reassess where they outsource operational tasks. From IT development and manufacturing to digital marketing and HR compliance, there are dozens of countries and firms to choose from. So, where do you start?
In a recent survey of 65 companies, we found that the most popular outsourcing destination is the Philippines, with 1 in 4 respondents hiring Filipino talent.
But depending on your industry, outsourcing needs, and budget, another solution may work for you. Let’s take a look at the overall state of outsourcing in 2023 before we look at the top 5 best countries for outsourcing in 2023.
What is the state of outsourcing in 2023?
Despite significant supply chain bottlenecks during international lockdowns, the demand for outsourcing continued to grow. From outsourcing services locally to hiring international remote workers, manufacturers, and other talents, most industries are finding their competitive edge through cost-effective outsourcing partners.
Take the biopharmaceutical industry. In one 2022 study, 86.9% of companies said they outsourced manufacturing tasks, including testing, analysis, compliance, and plant maintenance.
Meanwhile, an Accelerance report on IT outsourcing found that 60% of organizations outsourced at least part of their software development. The same report also highlighted that enterprise-level, offshore partners are likely to be the “sweet spot” for most organizations when it comes to both quality and cost.
But as geopolitical conflicts heat up, it’s essential to consider where you hire.
In Eastern Europe, the Ukrainian-Russian war could cause instability, although there are many resources for hiring Ukrainian service providers. Balkan and Eastern European states have long emphasized STEM and English fluency, ensuring high-quality work and communication.
Latin America offers several qualified talent pools and manufacturing centers that work in time zones that correspond with the United States, making communication simple.
In South and Southeast Asia, the Philippines and Vietnam are rising to prominence as more and more of the population speak English fluently and can deliver high-end services.
So, where should you look for outsourcing? Well, finding the best countries depends on what you need.
What are the 5 best countries for outsourcing in 2023?
1. Best country for outsourcing IT and software: Poland
IT and software are among the most challenging areas to outsource, if only because there are so many options in the tech sector across the globe. Over the years, India, China, Ukraine, and Argentina have all been popular countries to find software developers inexpensively, especially for startup tech companies and small businesses.
Yet more and more companies are tapping into Poland for high-quality, affordable talent. While Polish developers may charge more than professionals in South America and South Asia, they also bring high-quality communication and development skills. You may also find a large talent pool of professionals proficient in additional specialties, such as finance or regulation.
“Polish outsourcing companies abide by stringent GDPR and other EU privacy and data security regulations,” says Tom Miller, CMO of FitnessVolt. “Your software development project, customer data, and other corporate data can all be kept safe thanks to these safety laws.”
Some alternatives in this outsourcing sector are Japan, the Czech Republic, Croatia, Albania, Bosnia, and Serbia.
2. Best country for outsourcing manufacturing: China
When it comes to manufacturing, the country with the highest growth in early 2023 was China.
In 2019, manufacturing accounted for approximately 30% of its total economic output. With its low labor costs, it continues to be a key manufacturer for many businesses, despite the pandemic and supply chain delays.
However, there are some drawbacks to manufacturing in China. For example, the lack of proficient English speakers in China may cause communication gaps. Currently, less than 1% of the population speak conversational English.
In addition, local regulations are complex, and depending on your setup, it’s likely you will need help navigating the compliance landscape. And while China has its own set of regulations, intellectual property (IP) laws often aren’t a priority for law enforcement. Working with a reputable and reliable manufacturer is critical to success.
3. Best country for outsourcing HR and compliance: U.S.
For businesses located entirely in the United States, with no need to register abroad, it’s often best to keep HR and compliance domestically—even if you outsource some other tasks to an outsourcing country.
Having a local firm on the ground that can keep up with regulation changes, speak with employees, and work with the team, even remotely, is still a plus.
4. Best country for outsourcing customer support: Mexico
Mexico remains one of the most popular countries for outsourcing any task that might directly affect the customer, such as customer support or marketing—although you can also find skilled professionals and firms across other industries.
There are many good reasons that Mexico continues to attract U.S. businesses. Not only is the country located in a similar time zone, but its highly skilled professionals are also cost-effective.
Furthermore, given the proximity of the two nations, outsourcing relationships are much easier to navigate and manage.
“We outsource to Mexico. That’s because it has a similar time zone to America. So we don’t have to worry about working at weird hours,” says Perry Zheng, CEO, and Founder of Cash Flow Portal. “It also saves us a ton of money.”
Some other countries to consider in this sector are Argentina, Uruguay, and Brazil.
5. Best country for outsourcing marketing: Philippines
One of the most popular destinations for outsourcing work is the Philippines—and for good reason. Not only is hiring within the country cost-effective, but it’s the 3rd-largest English-speaking country in the world, making communication a cinch.
In fact, recruiting from the Philippines is standard across industries, not just for marketing tasks. IT, manufacturing, and customer services support are all options.
“The Philippines is one of the best countries to outsource work to, not only in terms of cost but because Filipinos are very hardworking and trustworthy,” says Clint Proctor, lead editor, Credit Cards and Travel Rewards at Forbes Advisor.
Alternative outsourcing destinations in this sector are India, Pakistan, Malaysia, Nigeria, and Bangladesh.
Key factors to keep in mind before you outsource
Reduced labor costs are one of the key reasons businesses choose global outsourcing. But it shouldn’t be your only reason. Choosing “cheap” instead of compliant or high-quality services and products can result in a disaster for your organization and your customers. That said, there are plenty of highly effective, talented professionals and potential partners abroad that can mimic an in-house business environment.
When looking to outsource to international companies, it’s essential to consider several key factors:
- The specific skill set your company needs and your contractor’s expertise
- Government laws and regulations
- Language and cultural differences
- Communication and project management limitations or special considerations
- Protection of IP and proprietary information
- Sending and storing sensitive customer or employee information
What to know before hiring independent contractors
Whether you hire an outsourcing company or a contractor, it helps to have a streamlined checklist to navigate hiring and onboarding. This holds true no matter where your hires are. From Arizona to Zimbabwe, it’s essential to get the paperwork and logistics right.
For more tips, check out Zenefits’ guide to hiring independent contractors and freelancers. We go over everything you need to know about bringing in a third party, from worker classification to security measures.