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Outsourcing to Indonesia vs. Offshoring to Indonesia

Keith Tan
August 17, 2017

Outsourcing refers to an organization contracting work out to an external vendor. Offshoring refers to getting work done in a different country, usually to achieve cost savings.
Possibility #1: You could outsource work but not offshore it. We use an external law firm, for example.

Possibility #2: You could offshore work but not outsource it. For instance, a Dell customer service center in India serves American clients, but it is owned and operated by Dell.

Possibility #3: A mix of offshoring and outsourcing - you hire a vendor to build and manage a team to do the work offshore. You take advantage of lower costs, the vendor's expertise in operating in the offshore location, economies of scale, and a large and a scalable labor (talent) pool.

Professional hazard: It makes me a little nuts how the terms "outsourcing" and "offshoring" are often used almost interchangeably today. However, there is a crucial technical difference. Outsourcing refers to the manner in which the business process is devolved. Offshoring refers to the location in which the business process is devolved to.

Risks of Offshoring to Indonesia (or setting up an Offshore Software Development Centre in Indonesia):
1. Geopolitical risk - Indonesia has seen almost 3 decades of uninterrupted stability. We operate in two of the safest cities in Indonesia - Bandung and Yogyakarta (or Jogjakarta).

2. Language differences
 - We at Wonderlabs only recruit talents with a decent proficiency in written and spoken English. At the very least, you'll understand them and they'll understand you. That's all the matters. The great thing about software developers in Indonesia, many of them learned English in primary school, and they read a lot of stuff online, most of which is in English.

3. Forex risk
 - We at Wonderlabs take care of the forex risk, because our rates are fixed in Singapore Dollars.

4. Daunting to set up a legal entity in Indonesia
 - We at Wonderlabs have our Indonesian entity that takes care of all the hiring for you. You won't need to ever set up an Indonesian entity, or even step foot into one of our three campuses. You're of course always welcome to visit us, or join in any of our many events.

5. Labour laws and terminations
 - Indonesia's labour laws can pose a challenge for a newbie. But having operated in Indonesia for the last 8 years, we know the law well. When you terminate a contract with a Wondernaut (or resource, or talent, or FTE), we don't terminate him/her. Instead, we find him/her a new posting with a different client. The important thing is - we take care of all the fuss and muss.

6. Legal Jurisdiction of Contracts
 - One issue often raised by potential clients is the fear that their unfamiliarity with the legal system in Indonesia puts them at a disadvantage should it ever come to a contractual dispute (it actually never has come to that, in all the years we have been operating!). Wonderlabs is a Singapore-registered company (actually, we are a portfolio company of one Singapore's largest media conglomerates, Singapore Press Holdings). All contracts with Wonderlabs are executed in the legal jurisdiction in the Republic of Singapore.

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PS: This is an opinion piece by Keith Tan, Group CEO of Wonderlabs. Wonderlabs is the leading service provider helping companies build and manage software development teams in Indonesia and Vietnam. Across our various shared and dedicated centers, we have over 350+ active software developers. Since our founding in 2015, we have grown rapidly through innovation and our relentless mission focus - Connecting you to success and productivity. Alumni of Wonderlabs have gone on to work at some of the biggest companies in Southeast Asia.
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Why Singapore Startups should consider setting up here

"I started Wonderlabs because I experienced the problems of building and managing a distributed software development team in Indonesia from 2011 to 2015. I wanted to make it seamless and frictionless for companies to build and manage teams. On the other hand, I found that there are so many amazing software engineers in Indonesia and Vietnam and wanted to connect them to employers in Singapore, Hong Kong and Jakarta" - Ivan Chang, Executive Chairman, Wonderlabs Group


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Vol.1: Problems with Offshoring to Indonesia (or Outsourcing to Indonesia)

Even as Indonesia is fast becoming a red-hot offshoring or outsourcing destination for software development, there are some challenges that foreign companies (particularly Western companies) face when offshoring or outsourcing to Indonesia. ...

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