Difference between Outsourcing and Offshoring

Often, the words “outsourcing” and “offshoring” are used interchangeably. However, there is a very significant difference between outsourcing and offshoring, often having to do with scale and the type of operations you move. Here are some of the specific benefits of both outsourcing and offshoring and how the two compare to each other.

Back Office Outsourcing

Outsourcing is when you take a single, skill-based task needed to operate your business and pay an outside contractor to perform it. So, when you hire a writer to polish the content on your website or a transcriptionist to transcribe your meeting notes, you are outsourcing a specific task.

Outsourcing has been a significant component of businesses around the globe for centuries, but in the 20th and 21st century it has become increasingly effective to reduce costs and open up new opportunities because of just small our world has become. Using Internet technology you can discuss your project needs with men and women across the globe in real time.

By outsourcing you can reduce the cost of infrastructure management, cut down on overhead by hiring for certain tasks only when you need them performed and you have unlimited access to a highly skilled work force that you are not responsible for managing. There isn’t a huge difference between outsourcing and offshoring in these factors, but there are some differences to keep in mind.

Offshore Outsourcing

In terms of the difference between outsourcing and offshoring, there are a few factors to consider. To start, when you outsource a project, you are paying another company to complete work for your company. You can outsource your needs offshore, but actual offshoring is different.

Offshoring involves moving your efforts to another country entirely. Companies that close factors in their home country and move them to countries with lower labor costs, for example, are offshoring. Companies that hire a company in another country to handle key components of manufacturing are outsourcing.

In some cases the difference is minimal, but in many it is significant. When you offshore your activities, you are still responsible for direct oversight of the tasks, even as costs are reduced. Benefits include a lower workforce cost, a highly skilled workforce and 24/7 access to that workforce, allowing you to have work done globally.

So, which is better for your company? It depends entirely on what your current needs are. If your priority is to reduce your overhead and improve the quality of work being done, outsourcing alone may be enough, but if you want to tap into a limitless skilled workforce from firms across the globe, offshore outsourcing may be a better option. The difference between outsourcing and offshoring is not large, but depending on your needs, it can be significant.