Are Outsourcing and Offshoring the Same Thing?

Are outsourcing and offshoring the same thing? Close, but not likely. Explore the ways these two are different from each other and all the ways they're alike.

To achieve your company’s business goals, there are a plethora of business practices that you can venture into, such as outsourcing and offshoring. These business strategies will allow you to boost your productivity, flexibility and profitability while reducing costs significantly.

But are outsourcing and offshoring the same thing? Is offshore an outsourcing?

Hmm, many businesses have often interchanged these terms, but honestly, they have different implications. So, what exactly is the difference between these two delegation techniques?

Let’s talk about the important concepts of outsourcing and offshoring in business, and determine which option is best suited to your organizational needs.

What is Outsourcing?

Outsourcing refers to delegating specific tasks of a company’s operation to a third-party provider. This may happen within or outside the country.

For example, outsourcing IT services to another company to handle the technical issues in your daily operation.

Benefits of Outsourcing

Outsourcing has become super popular among companies and professionals wanting to reduce costs and improve their efficiency. But apart from these, outsourcing offers a myriad of benefits, including:

  • Outsourcing helps complete tasks for less money while still receiving high-quality results.

  • Outsourcing increases efficiency, allowing a company to do more with less through outside expertise.

  • Outsourcing frees up time to focus on the important stuff in the business. This will allow a company to boost productivity and scale faster.

  • Outsourcing can access talents unrestrained by geography and without too much effort or money investment.

  • Outsourcing can improve the flexibility of a company’s operation. An expert outside provider can offer services faster and is better equipped to deal with sudden changes or interruptions.

What is Offshoring?

Offshoring is when a company decides to transfer some of its business operations to another country to reduce costs and taxes.

Unlike outsourcing, going offshore doesn’t mean handing full responsibility for completing tasks to an outside firm because an organization still maintains control over the operation in another country.

For example, if you are a manufacturing company, you may choose to move some of your manufacturing processes overseas to achieve cheap labor. The company still retains control and may choose to transfer the existing workforce to that country or conduct a hiring process instead.

Benefits of Offshoring

To go offshore will save a company a significant amount of money just for labor alone. Of course, that doesn’t stop there, offshoring has more benefits, some of which are:

  • By opening a new facility in developing countries, you can access workers at lower labor rates.

  • When offshoring, you still maintain control over the operation, relying on people within the same firm. This allows for a more cohesive focus as opposed to contracting an outsider.

  • Offshoring increases profitability by creating demand in the offshoring destination countries.

  • When offshoring, a company can ensure continuous business operation regardless of time zone. With a scattered team in other parts of the world, you can operate 24/7, even when you’re sleeping.

  • Offshoring gives you better control over the management and quality. You can carry out operations and train your staff the way you want.

Are Outsourcing and Offshoring the Same Thing?

No, outsourcing and offshoring are not the same thing. However, there are so many similarities between the two that it’s no wonder many have confused one for the other.

Here are some of the similarities between outsourcing and offshoring that will get you thinking they are siblings from another mother:

  • Outsourcing and offshoring both involve delegation to external companies or individuals to perform business functions.

  • Outsourcing and offshoring can save you a significant amount of money. Even though companies leverage outsourcing for other benefits, reducing costs has always been one of their top 2 reasons for delegating work.

  • Both strategies allow companies to concentrate on their core tasks, meaning the activities that directly bring in profit.

  • When you’re offshoring or outsourcing, you get to tap expertise that is not available locally.

So, if outsourcing and offshoring are not the same, what are their key differences?

To answer that question, let’s look at different factors that will clearly show the distinctions between the two.

  • People

    If you outsource certain tasks to a third-party provider, you may not have a say in the individuals working for you. These professionals are hired directly by the external vendor and are chosen by them on your behalf.

    With offshoring, it’s different. You have the option to work with your existing employees or hire workers in the offshoring destination.

  • Control

    Another difference between outsourcing and offshoring is the level of control in management and quality.

    If you offshore, you have more control. Since you get to have a say on who works for you and how to get through certain processes, you have transparency on the progress and struggles of the daily operation.

    Moreover, since you get to track things up close, you can control the quality of work, stabilize it and increase it when needed.

    With outsourcing, you have a limited level of management control since you’re handing the responsibility of overseeing work to a third-party provider.

    This is also apparent when it comes to quality control. Work may not be consistent when you’re relying on various individuals to complete a task.

  • Scalability

    Outsourcing is a better option to optimize processes for short-term projects. You get to access global talents, streamline operations and improve efficiency all in one go.

    In the long run, offshoring is better for scaling the business. When you’re moving operations to countries with lower labor costs, you can optimize resources and eventually enhance efficiency. This will allow you to expand the company's global reach and remain competitive.

How to Choose Between Outsourcing and Offshoring

Are you still confused about whether your business needs outsourcing or offshoring?

Fret not, we have some tips to help you decide which one to go for.

  • Evaluate the Time Needed to Complete a Task

    The thing about outsourcing is that you can hire services on an “as-needed” basis.

    If you ever need a virtual assistant service for your occasional content, you can hire one immediately. In this way, you can accommodate your needs faster and avoid the tedious process of hiring an in-house worker.

    Explore the reasons why you need to hire a virtual assistant.

  • Determine the Amount of Control Required

    Are you crazy about having control over the operation of your business? If you are, then perhaps you should offshore rather than outsource.

    If you outsource, you have little control over the quality of the service. To gain complete control, offshore your work and invest in building new locations overseas where people within your company can quality-check results.

    To determine how much control is required, you may want to check your priorities first and see how accurately you’re using your resources. If the task you’re delegating is of low priority, outsourcing may be a better option for you.

  • Do You Need the Service Quickly?

    When you’re offshoring, training employees somehow becomes mandatory. However, training will be challenging as you will have to deal with communication and cultural barriers, as well as time zone differences. Due to these struggles, you need more time, which will eventually affect productivity.

    Outsourcing is the quicker approach. You get to focus on the tasks you only need to outsource, keeping your priorities straight.

Outsourcing and Offshoring FAQs

  • Is Offshoring the Same as Outsourcing?

    No, but they’re almost alike; it’s easy to confuse them. Outsourcing is delegating work to independent contractors, while offshoring refers to running a portion of your operation in a different country.

  • Is Offshoring a Form of Outsourcing True or False?

    True!

    Offshoring is a specialized type of outsourcing that involves transferring work to other countries (mostly developing countries) to reduce labor costs.

  • What Is the Difference Between Offshore Insourcing and Outsourcing?

    Offshore insourcing is the business practice of working with an in-house team in another country. This means keeping business processes within the company instead of letting an external vendor handle them.

    Meanwhile, offshore outsourcing is the business practice of hiring external services or individuals to complete certain tasks offshore.

Key Points to Ponder

In a nutshell, outsourcing and offshoring are not the same. The former is delegating functions to an outside vendor, which can be done within or outside the country. The latter, on the other hand, is about moving jobs to another country.

Yet, both are excellent, cost-effective solutions for small firms or even established businesses looking to save resources and expand their operations.

If you’re ready to go the distance, connect with us and start virtual assistant outsourcing!

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