Outsourcing and Offshoring: What Are the Differences

Outsourcing-and-Offshoring

In general, offshoring is the process of taking a function from a company’s offices to an offshore location. Outsourcing, on the other hand, refers to letting a third party provide a service for a fee. The difference between these two terms is rather subtle and may not be easy to define. However, there are several factors that separate outsourcing from offshoring. Let’s explore them now!

What is Outsourcing and Offshoring?

Outsourcing: A company allows a third party to provide the service instead of itself.

Offshoring: A company moves its business process, but not necessarily functions. It can be used for cost reduction or just to relocate the job overseas.

Differences between Outsourcing and Offshoring

The process of outsourcing is different from the offshoring:

  • Definition: Outsourcing is the process of hiring a third party to provide services, while offshoring refers to moving business processes; it is about shifting the actual work away from the company’s offices and oversea locations.
  • Risks and criticism: Outsourcing involve risks, which are more associated with the third party than the company. Outsourcing can be controversial because some jobs may not get done properly or at all. It is also easy to accuse companies of outsourcing when they make decisions that do not directly affect their customers’ needs and wants. Offshoring is a more cost-effective way to achieve the desired results.
  • Benefits: Outsourcing provides the company with more flexibility in terms of hiring and retaining talent. The company can also use offshoring to increase its presence in a new market or for increased competitiveness. Know more about outsourcing & offshoring here at ParallelStaff.

Benefits of Outsourcing

There are many benefits of outsourcing, which include:

  1. Costs are reduced.
  2. Productivity is increased.
  3. Company can have a global presence.
  4. Businesses are able to focus on their core competencies.
  5. Outsourcing provides flexibility and allows the company to focus on what it does best.
  6. Services can be more efficiently provided by third parties.
  7. More options exist when working with a third party because they can work more efficiently.
  8. The company can avoid the costs of establishing a new business in an entirely new market.
  9. Outsourcing provides access to local talent and expertise.
  10. Outsourcing is often used as a way to lower the cost of research and development.

Benefits of Offshoring

There are many benefits of offshoring, which include:

  1. Increased competitiveness
  2. The company can focus on what it does best
  3. There is less risk associated with outsourcing because the work is done by a third party rather than within the organization.
  4. Outsourcing is cost-effective and can help the company to achieve better results with less risk.
  5. Offshoring allows companies to tap into a wide range of talent and expertise around the world.
  6. Offshoring provides access to local talent and expertise.
  7. Offshoring can help companies stay competitive in an increasingly global economy by being able to tap into a wider talent pool.
  8. Offshoring can also help companies to reduce the cost of research and development by being able to tap into the talent pools of countries with lower labor costs.

Conclusion

Outsourcing and offshoring are often used interchangeably, but there is a big difference between the two. If you want to understand what it means to outsource or offshore your business, you can use this article as a guide.

Outsourcing and Offshoring: What Are the Differences
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