- Outsourcing vs. Offshoring: Knowing Its Difference and Importance
Outsourcing and offshoring work to achieve quite a similar goal of finding a business process strategy that can help businesses cut labor, operational, overhead costs, and other expenses, while simultaneously increasing revenue and sales.
However, outsource and offshore strategies differ in some ways, especially on how it works, but outsourcing is explained as contracting a business process to a third-party service provider. Offshoring or overseas outsourcing, on the other hand, takes advantage of having an offshore center. It sends business functions to a different country.
Outsourcing vs. offshoring: what is the most preferred method?
When it comes to benefits, both outsourcing and offshoring can give advantages to the business. For one, outsourcing is a go-to business strategy for its cost advantages. It is the chief motivation of businesses in contracting work to third-party service providers instead of building an additional team in-house.
Another outsourcing benefit is saving time in doing seasonal and menial tasks to focus more on core competency and growing the company. In times that a business doesn’t have expertise of certain business activities in-house, outsource can also be an excellent option.
Offshoring also provides similar benefits as outsourcing. It’s a cost saving opportunity for offshore outsourcing companies who doesn’t want to invest in their own infrastructure, additional employees, and necessary equipment. When you outsource offshore, it also opens up a chance for your business to take advantage of competitive skills that can gain them a global edge in the market.
Choosing between outsourcing and offshoring mainly depends on what is more ideal and beneficial to the business. However, there is also an advantage in combining the two: offshore outsourcing. It is to take gain of the benefits of both strategies including achieving a more specialized skill that is otherwise not available in-house. It’s also a great middle ground for lowering costs and expenses but gaining a higher productivity and revenue.
While there are countless benefits in outsourcing, offshoring, and combining both, or outsourcing in other countries as well as locally, they are also susceptible to problems and risks. While it makes the business process more convenient, it still adds complexity along with the challenge of having an external organization.
When do you outsource or offshore your business?
The strategy of business process outsource has become common in a lot of businesses. No matter what the size of a company is, whether you run it by yourself or you are a part of a large corporation, outsourcing or offshoring can be extremely beneficial.
These two can be an excellent choice for cost-cutting efforts in a business. For one, contracting your work outside the company where labor cost is cheaper can save you a fortune. Lack of expertise in a certain business function is also a reason to outsource or offshore.
There are cases that you can either outsource or offshore depending on what works best for you; for example, choosing where to contract your production. However, there are times that a particular business process can be outsourced but is not advisable to be offshored like legal services.
Knowing the how’s and when’s of outsourcing service for businesses
This section discusses the how’s and when’s of outsourcing. You would learn the exact steps on how to begin outsourcing, some of the things to consider before getting into the practice, as well as knowing the best time to start.
Hiring an outsourcing service provider enriches any business as it allows a company to save money and become more efficient. Every company has its own expertise, and outsourcing lets you focus on leveraging your team’s own strengths.
There are some significant advantages to gain when paying others to lend their knowledge and skills to your business. In essence, letting others do what you cannot do better is what outsourcing is all about.
Before delving deeper into the topic, here are a few necessary things to know about business process outsourcing (BPO) that you may find useful as you read on. A question more commonly asked is, outsourcing is when a company does what? Here are some points that can answer this question:
- It means contracting a third-party to carry out tasks that were initially performed in-house by your employees.
- It is usually a cost-cutting business strategy.
- It allows you to allocate more of your time and resources to your company’s core competencies.
- It includes both local and foreign hiring, which could also mean establishing a separate infrastructure in a different country. This is otherwise known as offshoring.
- Offshoring is different from outsourcing in the sense that a business can outsource without having to offshore.
- Contrary to insourcing, which is typically done by a third-party within a company’s premises, outsourcing is implemented in the service provider’s office or building.
Understanding a little bit about what it means to outsource jobs would help a lot while reading this article.
Now that you know these necessary things, here are the how’s and when’s of hiring an outsourcing service for your business.