Outsourcing in Singapore: Competitive Factors and Entrepreneurial Challenges
Singapore stands as a global hub for entrepreneurship and outsourcing, primarily attributable to its business-friendly compliance regulations, low corporate tax rates, substantial government support, and unique geographical location.
For prominent firms and multinational organizations seeking to broaden their network and consumer base, outsourcing to Singapore proves to be an appealing choice. This strategic move allows them to conserve valuable company resources by leveraging the expertise and relevant experience of service providers in specific business functions, such as establishing and managing IT infrastructure, software and application development, digital marketing, among other services.
For small and medium enterprises, especially those lacking in-house skills for various back-end services or facing budget constraints for training and hiring in-house staff, collaborating with a reputable outsourcing partner in Singapore is a prudent consideration.
The outsourcing workforce in Singapore places a strong emphasis on delivering high-quality and timely services for all corporate needs through efficient work processes, aided by advanced technological tools. Even the Monetary Authority of Singapore (MAS) has established clear outsourcing guidelines, ensuring that company owners truly benefit from engaging an outsourced service provider for their business functions.
What makes Singapore a competitive place for outsourcing?
Tax System
As per International Enterprise Singapore (IE), the corporate tax rate of 17% stands as one of the lowest globally. The tax system undergoes continuous adjustments, consistently moving downward to stimulate local business growth and attract foreign investments across various industries.
Government Support
Manufacturing and financial services are recognized as pivotal pillars of Singapore’s economy, making substantial contributions to its annual GDP. The Singaporean government actively promotes the expansion of these sectors by implementing pro-business policies, streamlining compliance rules, and reducing bureaucratic hurdles. The journey to entrepreneurial success is further facilitated through a range of government-funded financial assistance programs, cash grants, and access to cutting-edge technological innovations across various industries.
Trade Performance
Singapore’s significance as a major trading post bridging East and West is not solely attributed to its limited natural resources but predominantly to its adept utilization of the extended concept of intermediary trade, specifically Entrepôt trade. The nation heavily relies on exporting a diverse range of raw goods and materials, subsequently processed and refined within local industries before being exported again.
In the year 2019 alone, Singapore successfully shipped a substantial amount, exceeding $400 billion, worth of consumer products globally, with electrical equipment emerging as the highest revenue-generating export. Other top export groups include computer machinery, oil and other mineral fuels, medical apparatus, and precious gems. As the 15th largest exporter worldwide in 2018, Singapore contributed to 2% of the total global export share.
What are the challenges that can drive away outsourcing clients from Singapore?
Time Zone Difference
Effectively managing a remote workforce can pose significant challenges. When virtual team members are situated on the opposite side of the globe, the prompt clarification of specific project requirements becomes a potential issue, particularly when emails or chat messages are sent outside the working hours of the outsourcing service provider. The absence of immediate and clear communication regarding work expectations can result in decreased quality, delayed delivery, and ultimately, diminished client satisfaction.
Ideally, projects should be completed in advance during Singapore time, ensuring that US/Europe-based clients receive the deliverables promptly, or work on the next milestone can commence as soon as they begin their workday. Despite time zone differences, with the implementation of effective collaboration strategies and communication tools, it is possible to keep clients and outsourcing employees aligned in terms of project delivery and output quality.
Singaporean Culture
Chinese values and cultural influence place a strong emphasis on hierarchical structures, whether within the family, society, or the workplace. The assumption that individuals from specific countries or ethnic groups possess varying levels of skill or business acumen can detrimentally impact the overall productivity of the outsourcing team.
Similarly, Singaporean culture is highly client-focused, which is advantageous for building and sustaining robust work relationships. However, this emphasis on pleasing the client may lead even the most skilled Singaporean outsourcing professionals to prioritize client satisfaction over adhering to standard operating procedures, potentially resulting in operational inefficiency and resource wastage.
Cyber-crime Surge
While Singapore boasts of being the safest country globally, this claim does not hold true in the realm of cybercrime. Despite its reputation as a secure nation, Singapore faces an increasing number of sophisticated cyber threats, with 11 million web-based threats recorded in 2019. The city-state, functioning as a regional financial hub in Asia with advanced digital banking systems, is a prime target for fast and audacious cybercriminals.
One of the notable cyber-attacks in Singapore occurred in 2013 when anonymous hacktivists targeted the country’s web censorship law by exposing personal information of government employees. A significant breach transpired in 2018 when the electronic medical record database of SingHealth, Singapore Health Services, was illicitly accessed, resulting in the theft of confidential patient data for almost 1.5 million individuals.
Other noteworthy incidents include the SingPass virtual hack in 2014, a malicious ransomware attack on personal computers in 2017, and data leaks related to HIV and blood donor information in 2019.
The current Personal Data Protection Act (PDPA) of Singapore, though sharing similarities with the GDPR in terms of personal data handling, exhibits concerning loopholes such as the lack of a definition for Sensitive Personal Data, absence of individual consent for certain sensitive information, unclear minimum age of consent for data use, non-classification of certain client data as sensitive for business use, and the absence of an ‘opt-out’ provision for individuals unwilling to disclose personal information.
Data breaches in prominent companies often result from the careless handling and storage of sensitive information in local servers. There is a pressing need to make substantial amendments to the existing Singapore Personal Data Protection Act (PDPA) to align with the evolving business landscape while fortifying data privacy in the digital economy.
