Before concluding that offshoring doesn't work, would it be worth asking what actually doesn't work in the relationship?
On account of work, I have been privileged to have frequent conversations with several CPA firm owners and leaders across the country. During such discussions, when bandwidth challenges surface, I ask them if they have ever tried or considered offshoring as a strategy.
I commonly hear responses such as "we failed at offshoring" or "offshoring is not for us" or "offshoring is not a successful strategy for the long term." It was either through their firsthand experience or simply from hearing about another firm's bad experience that they reached these conclusions.
So far, my most valuable takeaway from these discussions has been that "offshoring didn't work for us" can mean different things to different firms. And most often, it starts becoming clear that it was how offshoring was done that caused the failure rather than offshoring itself.
Some of the most common issues that keep showing up are around expectation setting, quality, communication, onboarding/integration, monitoring or resource continuity. And in some cases, it could simply be the wrong offshore provider.
A CPA firm's managing partner shared with me that his firm tied up with an offshore company in India. When they signed up for a couple of senior tax associates, the offshore provider promised to assign experienced resources for the account so they could hit the ground running soon after onboarding. However, soon after the kick-off, the client realized they had very limited experience in "reviewing" individual returns as they had mainly been preparers all along. Was the claim that they were experienced false? No. But was their experience relevant for this client? Not really.
Another CPA firm tied up with an offshore provider. It was agreed that a couple of offshore tax seniors and a manager would be assigned. The expectation was for seniors to prepare the complex returns while the manager would review them. After work commenced, they realized that this manager had significant experience with individual and business tax returns only, but very little experience with trust returns. What made this an even more painful experience was that this mismatch was discovered close to e-filing deadlines.
In both of the above cases, did the offshore providers understand the actual requirements before assigning the resources? No.
Could the CPA firms have been clearer about their expectations and assessed the proposed candidates in the initial stage? Yes.
Doing so could have identified any mismatch between the firm's expectations and the resources' capabilities.
In another case, a CPA firm faced a low resource utilization issue with its only offshore resource. The arrangement between the firm and the offshore provider was that the resource would be committed for 40 hours per week. However, the resource worked for less than 20 hours per week on average for an entire month. Why was this not found on day one or week one? Why did it take a whole month before it became an escalation? The U.S. team felt the offshore agency should have tracked the time metric on their own, while the offshore team felt the U.S. team should have tracked it as it was simply a staff augmentation model as per the provider.
The problem was not merely poor utilization. It was about establishing clear ownership for the monitoring process once the engagement kicked off. Had ownership for monitoring been defined and had utilization been monitored, this issue could have been identified and fixed much earlier before it turned into a messy escalation. These are just examples, but there are a variety of other reasons why several offshoring relationships struggle — poor responsiveness, poor employee retention, inadequate time for integration.
While one can call this "offshore relationship failure," upon careful and objective analysis, several of these very same issues can also take place when the CPA firms hire local talent for their U.S. offices.
Can there be expectation mismatches around experience or skill sets in the domestic hiring process? Yes.
Can staffing agencies misunderstand and thereby present the wrong candidates for a domestic hire? Yes.
Did one or a couple of bad domestic hires make CPA firms reach the same conclusion as they did with offshoring — that domestic-hiring won't work for them? They don't abandon domestic hiring. They tweak the processes and try again.
If that's the case, can U.S. firms evaluate offshore hiring using the same lens as they do with domestic hiring? Is it because the domestic hires are seen as their own, while offshore hires are seen as external transactional resources? If this is true, perhaps CPA firms should also take some responsibility for the failing offshoring relationships.
There are several forward-thinking CPA firms that work with different offshore providers where offshoring as a strategy has been set up for long-term success. Many fast-scaling offshore teams have grown from a single employee in India a couple of years ago to large offshore teams. This has been possible because both the offshore providers and the U.S. firms worked in partnership and stayed invested for the long term.
In a partnership-based relationship, I have seen U.S. firms and offshore providers do several things differently starting from provider and candidate selection to structured onboarding and smooth integration with the U.S. firm's processes and expectations.
Such firms recognize their high performers in different ways, including onsite opportunities during busy season periods. They include offshore teams in internal discussions and town halls rather than treating them like outsiders. They make sure that the physical distance of 9,000 miles between the U.S. teams and the offshore teams is not felt by either party. Most importantly, they do not expect offshore team integration to happen automatically merely because the provider supplied capable people.
On the other side, offshore providers need to wear the hat of "real partners" instead of asking firms to be treated like one. The providers must understand the actual requirement, be honest about resource capability, assign the right people, manage/monitor the teams, communicate issues openly, and maintain continuity. Misrepresenting or overselling capability in the short term can win a few new clients or add some extra headcount. But that is incompatible with long-term relationships.
Having seen some successful as well as not-so-successful offshoring relationships, I can say one thing with confidence: Offshoring works best when both parties are equally invested in making it a success. For example, the CPA firm mustn't think, "We bought 40 hours per week. Now deliver." Similarly, the provider shouldn't think, "We supplied the employee. Now let them manage the utilization." They should both think about how to make the relationship successful.
When that happens, problems may still surface. And when problems arise, firms will talk about what isn't working and how it can be fixed instead of saying "offshoring won't work."
