What’s what: Outsourcing vs. Offshoring

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The two terms have currently profused in the online information portals with such multitude that most people often find it difficult to identify the difference between them. More often than not, we use them interchangeably, but beware with some sensitive Nazis, as outsourcing and offshoring stirs much opinions both in the business world, job market and most especially politics, the words should be uttered or written with much distinction.

First, let us be on the same page: outsourcing is different from offshoring. If it’s the first time you’ve heard about it, remember that the two are of the same nature, but of different practice and effects if you look closely.

Outsourcing is a process, a human resource acquisition from outside the company. Most of the times, this is done to complete a non-core business task. The business contracts to a third party who specialize in the job, like a university having an agreement with an accounting firm to compute for them, or a computer company having a contract with a engineering firm to put up their new facilities. One nature of the process is that, no matter how many jobs the client business outsources, they still maintain the main functions to be performed by their own employees.

On the other hand, offshoring is also a process, and a human resource acquisition from outside the company. However, what separates it from the latter is that the workforce always comes from outside the country, and it is mostly done to complete a major business task. This happens when an enterprise decides to go to a third party (most probably from outside the country,) to save money from what they are supposed to pay for regular local employees with regular currency. Some examples are when a programming company in Europe hires a programmer in India to do the work without going to Europe. The very nature of this process is leverage, they hire more employees from the other side of the globe to afford more man hours than they can have inside the country.

Whether to use outsourcing or offshoring greatly depends on what service does a company need. Moreover, here are some expert advice to determine whether to outsource or do the latter:

Outsource when…

  • The subcontractor is a specialist in the job that isn’t the forte of your company.
  • Your company can do the job just as the same, but the subcontractor offers a much economical price.
  • The demand for the work is uneven; it will cost too much to pay for a steady workforce.

Offshore when…

  • The price offered by the foreign subcontractor is a great bargain and their services are also as good as yours.
  • The quality of work is much better than of locals. This applies to some specialty jobs that are not common inside the country.
  • Your company needs to provide services during the wee hours of the day. This is when you can take advantage of the time zone difference between the involved countries.

Outsourcing and offshoring are definitely becoming a worldwide business trend. But before you decide venturing with the techniques, choose a trustworthy company and do your part of research.

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