Offshoring vs Outsourcing

People often get mixed up because there is a lot of overlap. The best choice for you will depend on your company’s long-term goals, your financial needs, and the market.

What Is Outsourcing?

When a company outsources, it gives tasks, projects, business functions, or even whole departments to another company or group. The third-party can be a person or a company from inside or outside the country.

When you hire a law firm, you don’t have to keep lawyers on staff. Another thing you could do is hire a marketing company to help you launch your new product or rebrand. This would not put the daily operations of your marketing department at risk.

What Is Offshoring?

It still hires a third party to do a lot of different things when a company goes offshore. The third person is in another country. This usually allows the company to get more talented people or cut down on labor costs.

Moving call centers to a different country is an example of offshoring, as are other things. Alternatively, a company that wants to enter a new market could hire a marketing team in the country where it wants to go. This way, the company can make sure its promotions are culturally relevant. Finally, a company might hire a freelancer from another country to help with a one-time project.

As you can see, outsourcing can be done off-shore or it can be done right here at home. However, offshoring is only done outside of the United States. Companies also use offshoring and outsourcing for a lot of the same reasons, but there are some big differences between the two. Check out how each solution works in different situations to see which one is better and which is worse.

An offshoring job is one that is done outside of the United States.

It still hires a third party to do a lot of different things when a company goes offshore. The third person is in another country. This usually allows the company to get more talented people or cut down on labor costs.

Moving call centers to a different country is an example of offshoring, as are other things. Alternatively, a company that wants to enter a new market could hire a marketing team in the country where it wants to go. This way, the company can make sure its promotions are culturally relevant. Finally, a company might hire a freelancer from another country to help with a one-time project.

As you can see, outsourcing can be done off-shore or it can be done right here at home. However, offshoring is only done outside of the United States. Companies also use offshoring and outsourcing for a lot of the same reasons, but there are some big differences between the two. Check out how each solution works in different situations to see which one is better and which is worse.

The Pros and Cons of Outsourcing (with Examples)

Outsourcing is a good idea because it saves money and gives you access to certain skills that you need for your projects. We don’t just mean the ability to hire cheaper workers when we say “cost savings.” Companies that outsource also don’t have to pay for all the extra costs that come with hiring workers. For example, paying for job listings, onboarding, payroll, and worker’s compensation insurance when you hire people costs money. These costs add up, which is why an increasing number of companies are outsourcing.

This isn’t the only reason to outsource: It can help your in-house team. When a company has a new product launch or moves into a new market, for example, they might hire someone else to do the job. This allows in-house staff to keep working on the day-to-day tasks. A company may also need a skill set that isn’t available in-house.

A few things can go wrong when you outsource your work, but these are still important to think about. For one thing, it can be hard to build trust and to keep non-compete agreements. Companies sometimes have a hard time keeping their company culture alive when a lot of their workers are from outside the country. Outsourcing can also lead to a long-term dependence on third parties, especially if a lot of work is done by third parties for a company. For some businesses, this isn’t the best way to do things.

• For example, Hewlett Packard pays third-party call centers in Arkansas and Omaha, Nebraska, to answer customer service calls for them.
• T-Mobile used to send their call centers to the Philippines, but now they don’t. Later, they moved their call centers back to the U.S. because the federal government gave them money to keep jobs in the U.S.
• Walmart has a lot of factories in China, but the company also has a lot of warehouses that aren’t owned by Walmart.

The Pros and Cons of Offshoring (with Examples)

Some companies choose to offshore in order to get access to a wider pool of talent. Most companies choose to offshore in order to keep costs down. Cost of living is a big factor in labor costs in countries that have a low cost of living.

Despite the fact that global talent can be just as qualified as domestic talent, many companies have a bad reputation because they hire people from outside the country. Some people worry that offshoring will hurt their local economies, or they think companies that outsource customer-facing jobs don’t care about their customers.

• Apple: To keep its products affordable for consumers, the tech giant uses offshore manufacturing in China.
• Accenture is a company that provides services and consulting all over the world. It has its headquarters in Dublin, Ireland. It sends a lot of business functions to the Philippines.
• In the world of finance, J.P. Morgan & Chase is one of the best places to work. It sends call centers to the Philippines and India, where they work.

Offshoring vs Outsourcing: Final Thoughts

Even if you choose to outsource or go offshore, you’ll get a bigger pool of talent and lower costs than if you hire. Some companies get a lot of tax breaks, grants, and federal subsidies if they keep jobs in the United States. Companies that move jobs offshore can also get tax breaks. Just keep in mind that offshoring can have a big downside: public attention.