Are Outsourcing And Offshoring The Same?

Nearly every business looks for the most economical and effective way to deliver work. Outsourcing and offshoring are two such possibilities. Both seem to be similar processes, and people may even get confused. Both are different.

Wait, what?

Outsourcing and offshoring. Two different processes? You’re right. Let’s look further into it.

What Is Outsourcing?

Outsourcing is when an organization gives a task to someone outside the company. It might be something as simple as paying someone to clean the office or something more complex, like hiring a software developer in the Philippines or India or even in your local area to create a new app outside of the office.

What Is Offshoring?

Offshoring is the act of transferring a business process to another co Offshoring is the practice of moving business processes and jobs to locations outside one’s own country or company. In other words, it’s outsourcing business functions and jobs to foreign countries.

The Differences

Offshoring is often confused with outsourcing, but there are some differences between the two. Let’s check it out.

1. Location

In outsourcing, the company outsources its work to another company within or outside the same country. On the other hand, offshoring takes place when a company sends its work overseas to a foreign country.

2. Scale

Outsourcing is generally done on a small scale, like when you outsource your taxes or have a bookkeeper for your business. Offshoring is typically done on a large scale—like when you outsource an entire manufacturing plant or call center to another country.

3. Involvement Of The Third Party

Outsourcing involves third parties, such as recruiters or staffing agencies, who help companies find suitable candidates for outsourcing work. On the other hand, offshoring requires no third-party involvement because companies can simply move their production facilities overseas if they want to outsource their entire production process (or part of it).

4. Objective

The objective behind outsourcing and offshoring also differs. With outsourcing, your goal is to save time and money by hiring someone else to do part or all of your work. With offshoring, your goal is to save money by moving part or all of your business to another country—which often means paying less tax and avoiding labor laws (if any).

5. Potential Benefit

Outsourcing is about making your business more efficient by hiring people who can perform tasks for you at a much pocket-friendly cost than you would pay if you hired them locally. Offshoring is about moving your entire operation (or significant parts of it) to another country in order to avoid paying taxes or increasing profits through lower labor costs.

6. Control

Outsourcing gives you more control over how your business operates because you are not giving away valuable assets such as intellectual property or confidential data. In addition, outsourcing leaves your employees free to focus on their primary responsibilities rather than doing jobs that could be easily taken care of by someone else who doesn’t need to understand your business as well as they do.

Offshoring gives you less control over how your business operates because it transfers some control over certain aspects of your business overseas, including intellectual property rights and even customer information if sensitive data is transferred along with them.

7. Example

An example of outsourcing would be an American company hiring a foreign company to write code for them at a lower cost than they could do it themselves (and with more expertise).

An example of offshoring is when a U.S. manufacturer ships raw materials overseas for processing; then imports finished goods into the U.S., where they are sold at retail stores or by mail order. In another example, a U.S.-based software company may hire an offshore firm to design an application that will be sold in Europe or Asia, then train employees at its headquarters on how to use it once it’s ready for market.

Conclusion: Outsourcing and offshoring are not the same things.

The truth is…the terms are used interchangeably. Often, process and ideology are mixed into these discussions as well. The complexities of this global impact should be taken into careful consideration before making any sort of decision on the matter. If you are the one willing to tap the benefits of outsourcing for your business, let Elevate outsourcing help you manage your business.