Offshoring and outsourcing kept businesses afloat when the pandemic took place. Companies needed to adapt and develop strategies to recover their loss in revenue during the COVID-19 surge.
The reset in the business world opened doors for offshore and outsourced support practices to help industries thrive. Offshoring and outsourcing brought greater market reach at a significantly lower operating cost, paving the way for further business expansions.
Offshoring and outsourcing benefit companies in accelerating their processes and developments, but they are not the same. There are key differences between offshoring and outsourcing to help distinguish one from the other.
Offshoring vs outsourcing: What is offshoring?
Offshoring is transferring certain company functions overseas to reduce costs, especially in a country where the needed resources exist. US-based and UK-based companies, for example, send an entire team to handle branches located mainly in Southeast Asian countries.
Commonly, this is because of the reduced labor costs, significantly lower tax rates, and minimizing the gap between manufacturing and marketing sites. Offshoring could either be for product manufacturing or talent recruitment for service processes, depending on what the company sees fit.
Logistically, offshoring is the best option when expanding a business. It brings your company closer to your clients, increasing visibility and audience awareness. Offshore staffing encourages companies to improve process automation and embrace ethnic diversity in the organization.
Offshoring vs outsourcing: What is outsourcing?
Outsourcing is when organizations hire talents to complete specific tasks through a third-party entity, commonly known as business process outsourcing (BPO).
Expanding the in-house talent pool requires organizations to undergo a rigorous recruitment and selection process. Upon hiring, they must give training to the new employees, taking months for them to produce the expected output. Outsourcing cuts down processes for companies with a dedicated team who have proven skills for a job or project.
BPO firms offer their business clients solutions that have already been tried and tested in boosting company performance and sales.
Outsourcing places clients one step ahead of competitors who stick to traditional in-house staffing by reducing recruitment costs, providing the equipment needed, and offering a bigger talent market.
Clutch, a market research company, found that 90% of small businesses already consider outsourcing some of their operations in 2022.
Offshoring vs outsourcing: What are the key differences?
Offshoring and outsourcing can easily be interchanged since these two terms come hand in hand. One obvious similarity is that neither of the two operations takes place inside a business headquarters.
These two functions are in a different site away from the company but closer to resources like human resources, raw materials, and technological systems. However, there are ways to spot the key differences between offshoring and outsourcing.
The differences include locations, the number of tasks or workload, and how directly or indirectly related they are to the company that needs to offshore or outsource.
Location
Offshoring only means getting work done overseas. Global businesses, for example, invest in a developing country with a tremendous market potential or notable workforce. They might set up their factories and offices in this location and then send a fully calibrated team to handle their operations.
Foreign investors offer employment and investment opportunities to the locals and follow that country’s business regulations. These investments generate revenues for the government and increase attractiveness to other global investors.
On the other hand, outsourcing can be offshore or onshore but involves another business entity that offers solutions like customer service, sales, back office, or IT.
Most of the time, businesses from other countries work with BPO firms based in a different location to dedicate a team that will support their operations. However, local corporations may also outsource their functions to a BPO company within the same area or state.
Tasks
Offshoring means having an entire management team in a particular place. A business can send their employees from their headquarters or hire them from that country. This is ideal for a company’s long-term goal, like expanding business scales.
Tasks in offshoring may include long-term employment and overseas business trips to align with the global operations. Overseas teams might also have autonomy in the jobs and responsibility because of the subjection to the country’s labor laws.
Meanwhile, outsourcing works best for short-term projects and specific business support.
Outsourced jobs could be periodical, depending on the reinforcement a company might need during peak seasons for their industries. It skips the process from recruitment and hiring to the deployment of the team with a proven experience in the required solutions.
Commitment to the company
Offshore teams are directly under the company’s management, bearing its name and reputation. The organization decides on the employee’s job roles that are fully integrated within the company.
An offshore employee follows protocols and business standards; the main office implements for their entire global teams. They must adhere to the regulations, especially regarding data privacy and confidentiality in business operations.
With outsourcing, companies do not hold management rights to talents other than their project outputs. Support teams are limited to information necessary only for specific roles and projects.
Since they’re outsourced to a third-party entity, management responsibilities fall on the solutions providers, the BPO firms.
