Outsourcing in Singapore: A Complete Guide



Have you been toying with the idea of strategically using external resources to perform what your internal staff does? If so, trust me, you already know the potential of outsourcing. The good news is that you can choose to outsource all your functions or just a handful of it and still reap the full benefits.

Outsourcing your company’s functions lets you and your personnel concentrate on core business aspects. Are there other benefits as well? Your guess is as good as mine.  The modern business needs to outsource to maximise process efficiency and productivity, and to cut on cost as well. The bottom-line is-outsourcing is a substantial investment. You must therefore ensure that you’re doing it right.

What Is Outsourcing?

Outsourcing is the process where a business solicits external resources to manage or oversee the activities that are typically executed by their internal teams using in-house resources.

Outsourcing is a proven strategy where companies contract specialised providers to handle specific functions expertly. The process, at times, leads to the transition of employees from the company to an outsourcing firm.

Why Do You Need Outsourcing?

The entire outsourcing concept is hinged on the delivery of services by a third-party provider. Your business, in a competitive market, can be short of skills, expertise and talent. This forms the basis of contracting providers to fill in existing gaps.

Today, companies choose to outsource individuals or teams to provide software development, website design, project management or QA, among others.

Signs that you need to outsource business functions

If your business can attest to face some of the following, it’s high time to consider outsourcing. They include:

  • You’ve been trying to cut operating costs
  • Your team is faced with labour intensive tasks that overwhelm operational schedules
  • Your business is spread over geographical timelines, and you want to sustain effective communication and collaboration
  • Your business lacks specific competencies
  • You’re facing capacity issues regarding on-site infrastructure, space or capital
  • You know outsourcing gives you the chance to save time and money

Types of Outsourcing Models

Some of the outsourcing models you should know in Singapore include:

  • Professional services outsourcing
  • Manufacturing outsourcing
  • Process-specific outsourcing
  • Project management outsourcing ​
  • Operational outsourcing service

Professional service outsourcing

Companies often see the need to outsource some of their sensitive and complicated processes. Professional services once outsourced save lots of money and high costs involved. Some outsourced professional services are legal, administrative, IT, and accounting.

Manufacturing outsourcing

This is a highly preferred model. Companies find it extremely costly to produce specific goods locally. Steep production costs and shrinking product life cycles make it a lucrative proposition. Outsourcing manufacturing to Singapore gives companies the upper hand in production.

Process-specific outsourcing

A business that follows a specified procedure or process can outsource project-specific services. These processes are central to the continuity of an internal activity or process. Process specific outsourcing helps businesses to boost customer services, and they entail detailed contracting.

Project management outsourcing

Project outsourcing happens when you need additional hands on one of the projects that your business is juggling. Outsourcing project management ensures the overall quality. Your company leverages the best services and talent from an external service provider.

Outsourcing in the Singapore Marketplace

In Singapore, outsourcing remains a highlight from an economic perspective. Did you know that over 58% of corporates in the country have outsourced some of their functions? The contributors here are the usual culprits.

Singapore is endowed with high profile global connections, technological advancement, a vibrant corporate scene ad a supportive government. It shows that there are many positives to outsourcing in the country.

One known fact is that Singaporean experts who handle other firm’s work deliver professionally. Most of these experts draw on the technology avalanche that has swept across the South Asian country.

There is common knowledge within technology circles in the country that excellent delivery and world-class finesse is the recipe to staging Singapore as the outsourcing paradise compared to countries like Ukraine, Poland, Mexico or the Philippines.

At the same time, the Monetary Authority of Singapore (MAS) provides robust guidelines that govern outsourcing in the country. These guidelines provide directives on how they should be implemented.

Also, they indicate how a business that needs outsourcing can interact with MAS. Additionally, they stipulate how cloud computing and risk management affect outsourcing. MAS guidelines are unique, given that other governments are yet to issue such informative guidelines globally.

Understanding MAS Guidelines from an Outsourcing Perspective in Singapore

In July 2016, the Monetary Authority of Singapore (MAS) published a reviewed list of guidelines regarding institutions and outsourcing. Some of the previously published instructions were scraped off, and others were amended.

The revised guidelines describe an outsourcing arrangement as an undertaking where the providing company (currently or in the future) provides a service/resource. The parent company itself can supply these products.

The underlying circumstances in their arrangement dictate that:

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  • The institution depends on the service on an ongoing basis
  • That, the service is critical to the provision of financial services by the institution
  • That the service is offered to the market by the provider in the institution’s name

The revised directives brought forth a requirement that an institution must maintain a register of all its outsourcing arrangements, including material outsourcing arrangements.

  • Service providers and subcontractors

MAS, further directed that institutions should ensure that it’s services-implemented by the company or a third-party contractor should be managed as if they were originating from the provider.

  • Singapore groups

Singapore-incorporated organisations are required to ensure that branches and establishments under their control establish a group-wide outsourcing risk management framework to reinforce compliance to these guidelines.

  • Material outsourcing arrangements

The new guidelines define material outsourcing arrangement to denote any outsourcing arrangement; that, if a security breach occurs, it can materially impact business operations, reputation and productivity.

Further, the provision can affect its capacity to manage risks and compliance. It can be described so, if it involves customer data, and if a breach occurs, it can impact the company’s profitability or reputation.

The MAS guidelines clarify the responsibility of financial institutions and how they should manage risks in their outsourcing arrangements.

  • Cloud computing guidelines

Cloud computing is a critical aspect captured, and institutions are required to:

    • Do due diligence infuse risk management and apply management practices when they outsource cloud services
    • Formulate steps to mitigate risks associated with data integrity, access, confidentiality, compliance, resilience and auditing
    • Certify that service provider(s) can identify and segregate user data and have robust capabilities for securing customer information throughout the contract
  • Expansion of organisations’ scope

Revised MAS Guidelines have extended their scope to include persons/entities that are MAS regulated. They can be money changers, trust companies or owners of stored value facilities.

  • Removal of MAS notification requirement

On the contrary, financial institutions are obligated not to make MAS notifications if they enter into new arrangements. MAS will, however, keep appraising the financial strength of an institutions risk management frameworks.

Furthermore, institutions are required to do due diligence with their outsourcing arrangements, and they should prove to MAS that they indeed observe the new guidelines.

  • Notification of adverse developments

Should it arise, an institution is obligated to report to MAS of any adverse development with its outsourcing arrangements. This includes events that could lead to prolonged service disruption or total failure of the arrangement. Any breach of confidentiality or compromised customer information situations needs to be reported as well.

  • Due diligence

Institutions must carry out due diligence on service providers and their personnel. This can be done by appraising an organisation’s IT security protocols, physical security, financial capacity and overall reputation in the process. Businesses should also verify a provider’s workforce adherence to set rules, policies and regulations.

  • Audit frequency and scope

The revised guidelines state that institutions need to facilitate independent audits and expert assessments of their outsourcing arrangements- material and intangible. Audit frequencies here are dependent on the extent of risk and the outsourcing arrangements impact on the institution.

Considerations When Making Outsourcing Decisions

You swore to outsource particular functions of your established or start-up. Though you’re yet to make this significant move; hold up, before you make the final decisions, there are considerations you need to make.

  • Cost savings

Have you visualised outsourcing as a cost-saving tool? If you haven’t considered how outsourcing will save your operational costs, the chances are that you’ll end up expending your budget. Checking whether outsourcing will save costs on equipment and staff is a good starting point.

  • Pricing

Vendors offer outsourcing services competitively. Don’t go for the cheapest vendor yet. However, you need to compare various offers and settle for the vendor with a relevant offer.

  • Resources and technology

You need to appraise technology and the resources on offer. Vendors should demonstrate how their capabilities and technology handle your needs. You need to ascertain that the provider has systems and applications that can manage your business intensive functions.

  • Ability to meet deadlines

Punctuality is a core aspect of outsourcing right from the moment you decide to outsource a function. Always ensure that a vendor can keep promises where time and delivery is concerned.

  • Minimal supervision

Outsourcing a vendor to take care of your functions is critical. But you need to ensure that they can execute with minimal need for supervision.

  • Limit liabilities

Some critical functions are fraught with liabilities. Consider outsourcing such sensitive services to reduce error and consequent problems.

  • Team leadership

Yes, you’ll save significantly with outsourcing, but you cannot act with blind faith. You need to do due diligence on the team that is taking over. Additionally, make sure you know who is leading the team.

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Steps to Successful Outsourcing

Gone are the days when expenses and lack of talent were the top reasons for outsourcing. Today, business do so strategically with an intent to revitalise in-house processes. Successful outsourcing requires:

  • Clear company goals and objectives
  • Strategic vision and planning
  • Thorough vendor selection
  • Responsive relationship management
  • Properly structured SLAs
  • Frank communication with stakeholders
  • Senior-level support and involvement
  • Personnel issue mediation
  • Financial justification

Clearly, outsourcing requires a well thought out plan. You wouldn’t want to fly a rudderless plane. After all, perceiving outsourcing as a one size fits all solution could end up disastrously. Some steps to successful outsourcing include:

  1. Formulate and set outsourcing rules and goals

Your team probably has divergent ideas on outsourcing and how to implement it. Always ensure every member is on the same page if you re outsourcing to cut costs, scale faster or to keep your competitive edge.

  1. Check your current infrastructure

Evaluating your current infrastructure will tell you where you need to focus on. Check your internal and external capacities. With research, you’ll know if you’ll need an upgrade before you outsource or not. Don’t forget; you can start small and transition gradually.

  1. Management of offshore teams

Successful offshore outsourcing requires skill and knowledge. But are you and your top-level managers endowed with the expertise to do it? Consider your hiring procedures for an overseas team, set KPIs and streamline communication between your internal and offshore teams.

  1. Note the challenges and benefits

You don’t want to invest in outsourcing that bears no fruit for your company. Initially, you need to identify your outsourcing hindrances. Could government regulations-MAS guidelines, technology, and the economy present challenges? While at it, try and identify the benefits that you can get from outsourcing.

  1. Know the outsourcing market

Before you take the outsourcing plunge, evaluate the models of outsourcing. Check the one that best fits your needs. Identify appropriate vendors, their track record, pricing and the success of their clients.

  1. Anticipate multiple scenarios

Your outsourcing plan needs winging from other projects. You need to assess every possible scenario. What could go wrong? What could go right? Check these against your implementation, systems and processes.

  1. Run risk assessments

You’ve identified all the probable risks that threaten your business in the outsourcing context. You need to weigh potential damages from a legal, environmental, or technological viewpoint. Look into ways you can turn those risks into opportunities together with your potential provider.

  1. Create your business plan

In the end, you’ll need to craft an outsourcing action strategy. Before that, ensure that you assess the following:

  • Total cost of sourcing
  • Possible scenarios
  • Expected workload
  • Financial impact
  • Goals and future expansion
  • Implementation timeline
  • Vendor sourcing

What to Know About Payroll Outsourcing

Payroll outsourcing refers to dispensing worker payments through a third-party payroll provider. Businesses stand to gain from payroll outsourcing as long as they understand the dynamics behind it.

What is Payroll Outsourcing?

Payroll outsourcing is the process of onboarding a service provider to take care of the administrative and compliance functions of paying your staff. Please note that you are in charge of incorporating your company as required in law. The service provider only handles the payroll part, and you take care of everything else about worker employment.

When to Outsource Payroll

In Singapore, when to outsource payroll depends on numerous actors. These range from the number of employees, local incorporation, the complexity of country employment and withholding laws and so on. If the cost, time and justification is locally complex, it’s wise to onshore payroll.

If you’re planning to dispatch your employees to a new international market, you can outsource a local provider or a service that offers comprehensive payroll services to all other employees in the said country.

When outsourcing payroll, companies can customise the function and retain some control. Some payroll functions you can outsource include:

  1. Payroll Management, processing worker pay and withholding dues
  2. Check depositing and funds disbursement
  3. Executing government tax and withholding payments
  4. Preparing and filing compliance reports
  5. Managing employee benefits and allowances
  6. Administering social security/pension money

Why Outsource Payroll

Do you want to avoid the challenges of running payroll in-house? Do you have a deficiency of professionals in the accounting and HR department? Then, that’s reason enough for you to outsource all or part of the function.

You can choose to outsource to:

  1. Cost-saving reasons-to save the vast resources needed to streamline in-house payroll
  2. To ease continuous payroll challenges in administration, personnel turnover and increasing compensation demands and compliance
  3. Avoid the repercussive tax mistakes and compliance penalties

Benefits of Payroll Outsourcing

Forget those DIY payroll apps and the tiresome manual alternative. It’s the only time you’ll realise the following benefits of professional payroll providers.

  • Time saved

Getting payroll right for your seven employees takes time. It’s repetitive, and you cannot afford to lose so many hours on payroll processing indoors. Choose payroll outsourcing and save time for core business activities.

  • Saves money

In-house payroll wastes time to calculate payroll, generating paychecks, distributing, generating reports and remitting payroll taxes. You’ll need more personnel to do this every payroll period. A full-service provider saves your money.

  • Enhanced security

Payroll processing comes with its vices; identity theft, record tampering or embezzlement. A reputable payroll provider ensures the safety of payroll data in your system. They have a reputation to guard.

  • Compliance

SMEs in Singapore have it rough in matters of government tax regulations. To avoid stiff compliance and tax penalties, a payroll provider is your best investment. A majority of them ensure clients are updated in compliance and filling matters.

  • Get professional expertise

Trusted professional payroll providers engage personnel with deep-seated payroll knowledge. They bring onboard their expertise to ensure the client’s payroll is functioning seamlessly.

How to Choose the Right Payroll Provider

Time, research, due diligence and your gut feeling can lead you to the right payroll provider. But, there are more questions you’ll need to ask potential providers.

  • What services can I expect in your service model?
  • Will you provide additional options if I want to scale?
  • Why should I outsource you and not your competitors?
  • What payroll information do you need from my company
  • What is the setup and implementation process like?
  • How long does it take to run my first payroll?
  • How well do you understand payroll tax and filing in my industry?
  • Can you process my tax if I have workers in multiple locations?
  • Do you integrate with in-house staff?
  • What payroll security measures and protocols do you work with?
  • What kind of support do you offer if the unexpected happens?
  • Can I see your portfolio including references
  • How do you calculate fees and are there hidden charges
  • Will you charge more if I scale and add more employees to the payroll?

What to Know About IT Outsourcing

Today’s marketplace is highly globalised and ultracompetitive. I don’t need to remind you that as a budding or an established business owner. Of course, you want your IT systems and solutions to run with minimal disruption. What if you don’t have core IT capacity or competency. The answer lies in IT outsourcing.

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Commonly outsourced IT services

  • Database development or management
  • Disaster recovery
  • Data centre management
  • App/software development
  • IT Infrastructure/network installation, maintenance and support
  • Networking and communications
  • Data storage and server space
  • Application support or management
  • Technical support or help desk

When to Outsource IT services

Businesses go for IT outsourcing for numerous reasons. Cost reduction, operational efficiency, access to external expertise and IT infrastructure are some key reasons. Others are:

  • Improved business focus

Your internal IT team isn’t all that. The lack of expertise in some crucial areas. Outsourcing those functions to a specialist provider lets you and your in-house team focus more on essential goals.

  • Access to experienced professionals

Outsourced IT teams have worked with multiple clients in your industry. They know what’s ailing your IT systems. They use their expertise to ensure your business faces no downtime.

  • Better budget management

Hiring and training a dedicated IT expert is seven times costlier than outsourcing a similar expert. What does that mean? You have more control over your IT budget.

  • Address issues rapidly

Having an internal IT support engineer means they’re often overwhelmed. Outsourcing frees your business from IT backlogs. The incoming team can handle all these challenges in the shortest time possible.

  • Reduce downtime

Yes, having an IT team on 24-7 standby means you can resolve it related hitches quickly. If your other IT guys are handling other technical issues, it delivers business value overall. Outsourced IT providers can monitor, anticipate and advise you on how to handle the problems in the future.

  • Be more competitive

Outsourcing IT functions enable you to leverage the IT knowledge that big businesses enjoy. It means you can gradually compete and stay ahead of the competition in your niche.

  • Provide round the clock monitoring

Your small underhanded IT team cannot monitor every aspect of your IT infrastructure. Hire an IT provider and notice the difference. Outsourced IT support keeps monitoring your system even when you sleep.

Common Misconceptions about IT Outsourcing

  • The internal team offers faster response

Companies tend to think that internal IT staff offer faster response than outsourced IT providers. Surprisingly, it’s a myth. Remote IT teams can configure, repair and maintain your systems without stepping into your premises.

  • An internal IT team negates the need for outsourced IT

Some business owners think that having an in-house team waters down the need to outsource the same. What if your team cannot diagnose a critical problem? The best way out is to outsource some functions and leave some to the internal team.

  • Internal IT teams are reliable than outsourced IT support

Reputable IT service providers work with service level agreements. They stipulate how, when and the frameworks for service delivery. Alone, your internal team cannot handle the demands of your end-users, especially if you’re scaling.

  • IT outsourcing poses compliance risks

What set up is likely to open your business to risk? An internal or an outsourced IT team? You’ll be right to say internal teams aren’t as updated as personnel from an outsourced firm. At least you can forget compliance woes with an ISO certified IT support provider.

Questions for Managed IT Service Providers

Don’t rush yet to sign a contract with AN IT service provider before you ask the pertinent questions. Outsourced packages aren’t a one size fits all solutions. Ask potential vendors these questions:

  • How do you support security compliance?

IT providers must support security in any bundled offer they provide. Check whether they provide features such as intrusion detection systems, firewall, incident response or vulnerability patching, among others. If they can’t match the level of security needed, consider alternatives.

  • Do you support incremental outsourcing?

To beat the risks of outsourcing, it’s better to divide the project into smaller segments. This allows you to assess their competency. It helps you know whether they can help you to scale incrementally.

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  • How is your service-level agreement like?

The service-level agreement is a critical component of IT outsourcing. You need to check their support activities, implementation procedures, deployment and Quality assessment, among others. Always check the T&Cs and their flexibility thoroughly before you append.

  • What experience do you have?

Is price the top considerations when appraising IT MSP? You could be getting it wrong. The better option is to shortlist based on the provider’s past successes, tech-savviness and maybe, the number of years they’ve been around.

  • IT strategy vs. emergency support?

If you operate on specific IT strategy, check whether the provider can wing it for you. Don’t hire if all they do is wait for your orders.

  • Who will govern our IT services?

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In the SLA, there should be clarity of who takes control over what IT functions. Ensure there is a fundamental governance framework that sets out the rules for collaboration with the provider’s team and your in-house IT department.

  • What is your reporting process?

Again, you need to query the provider regarding the reporting process. It’s entrenched in the SLA. Ensure that there is a consistency of reporting according to the scope and frequency agreed in the schedule.

What to Know About Project Management

Small and big businesses projects fail due to inadequate project management capabilities. Small businesses, for instance, will turn to outsourced project management to avoid this hurdle. Legacy systems of yesteryears cannot help in a disrupted and market place. Organisations that are tech-reliant need to consider outsourcing project management.

Benefits of Outsourcing Project Management

  • Eliminates the need to scale

Scaling up when your business grows is exciting. But come to think of the costs involved with expanding. Scaling means you’re tackling bigger projects with a bigger scope. Outsourcing your projects instead of scaling up is a profitable decision.

  • Higher level of expertise

Outsourcing project management capacities and talent presents more benefits compared to what your “born and bred” staff offers. You can leverage top-level skills at a low cost.

  • More flexibility

Hiring a project manager on an on-demand basis allows you to broaden your business vision. These experts have been there and done that. It’s not advisable to limit yourself to the limited expertise of your in-house project management team.

  • Multiple resources

For the cost of one in-house project manager, you can access the multiple resources offered by project management service providers. It’s that simple.

  • Complement existing resources

Your project management team, though overwhelmed, is making efforts to me3t deadlines. Think about the impact that external dedicated project manager can bring on board.

What to Know About Help Desk Outsourcing

Are your customer service and technical support departments always overwhelmed? Think about helpdesk outsourcing as the one-time remedy for such issues.

Help desk outsourcing refers to the engagement of a third-party resource or provider to manage their customer support and technical assistance.

This particular process outsourcing is popular with businesses that want to cut costs and keep their customer care services on point.

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Can Outsourced Help Desk Services Support your Business?

Have you ever interacted with overly stressed and overworked it help desk agents? Overwhelmed customer agents lead to unhappy end-users. This is more of a tenet if you’re wondering how to implement efficiencies and bring your customer service back to life. This is where you need to invest in help desk outsourcing.

Benefits of Help Desk Outsourcing to Your Company

  • Additional support increase

Despite the nine to five schedule, some of your customers need immediate help past regular working hours. Outsourcing help desk services on a 24- hour basis not only leads to customer retention, but it rewards you with high retention rates.

  • Improved response time

Help desk support and remote access are never far from each other. Outsourcing a help desk means you can identify, troubleshoot and save on labour or transport.

  • Industry experts

This is synonymous across all industries. Outsourcing the help desk means your customers get insights from a high profile team who understand the customer service environment.

  • Reduced costs

In-house support desk operations lead to high maintenance and running costs. Outsource your help desk and save. You no longer need to buy a telephone system and associated equipment.

About the Author

Tom Koh

Tom is the CEO and Principal Consultant of MediaOne, a leading digital marketing agency. He has consulted for MNCs like Canon, Maybank, Capitaland, SingTel, ST Engineering, WWF, Cambridge University, as well as Government organisations like Enterprise Singapore, Ministry of Law, National Galleries, NTUC, e2i, SingHealth. His articles are published and referenced in CNA, Straits Times, MoneyFM, Financial Times, Yahoo! Finance, Hubspot, Zendesk, CIO Advisor.


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