- Outsourcing vs. Offshoring: Knowing Its Difference and Importance
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.
Ultimate guide to outsourcing
- Business Process Outsourcing: knowing the basics and its benefits
- Business Process Outsourcing and its advantages
- 10 reasons why you need to outsource your business
- a. It reduces and controls the operating costs but increases revenues
- b. It helps You maximize the use of external resources
- c. It enables the company to gain access to world-class capabilities
- d. It can free up internal resources for other purposes
- e. It Requires Little to No Initial Capital Investment
- f. It Provides You Access to Trained or Expert Specialists
- g. It Allows You to Focus on the Core Competencies of Your Business
- h. It Reduces the Training and Labor Costs of the Employees
- i. It Gives You Instant Access to World-Class Skills
- j. It Ensures 100 percent Security in the Billing Process
- What Are the Business Areas That You Need to Outsource?
- Different Types of Outsourcing that You Need to Know
- Staff Leasing vs. Seat Leasing vs. BPO vs. B-O-T
- Outsourcing vs. Offshoring: Knowing Its Difference and Importance
- Part I: A Simple Guide Before You Start Outsourcing Your Business
- Part II: How Are You Going to Outsource Your Business?
- Part III: Is Now the Right Time for You to Start Outsourcing?
- Myths and Misconceptions of Outsourcing: Is It Real or Not?
- Myth #1 - Outsourcing Lets You Lose Control of Your Business
- Myth #2 - Outsourcing Only Aims to Cut Your Operational Costs
- Myth #3 - Outsourcing Guarantees Lack of Knowledge on the Services
- Myth #4 - Outsourcing Is Only Limited to Big Businesses
- Myth #5 - Outsourcing Will Let You Lose the Privacy of the Company
- Myth #6 - Outsourcing Means Offshoring: There Is No Difference
- Myth #7 - Outsourcing Delivers Low-Quality Services and Outputs
- Myth #8 - Outsourcing Weakens the Economic Status of the Country
- Myth #9 - Outsourcing Adds Up to the Unemployment Rate
- Myth #10 - Outsourcing Is Not a Long-term Plan
- Myth #11: Outsourcing Is Only for Established Businesses
- Myth #12: IT Outsourcing Is Way Too Complicated for Small Businesses
- Myth #13: Healthcare BPOs Can Increase Expenses
- Myth #14: An In-house Sales Force is Cheaper Than Outsourcing
- Myth #15: Outsourcing Sales Force Destroys Company Branding
- Real-Life Success Stories: How BPO Continues to Change Lives
- Why Do People Choose the BPO Industry as Their First Career Venue?
- BPO as the Ladder to Success: 10 Stories of Firsthand Experiences
- The Philippines as the Top Outsourcing Destination
- What Made Outsourcing Skill Sets in the Philippines Different?
- 10 Reasons Why You Need to Outsource to the Philippines
- 1. The Philippines Is an English-Speaking Country
- 2. Labor Costs Are Lesser Than in Most Western Countries
- 3. You Can Hire Flexible, Skilled, and World-Class Employees
- 4. Filipinos Ensure High-Quality and Excellent Services
- 5. Filipinos Can Adjust to Any Time Zone and Working Schedule
- 6. You Can Focus on Handling the Core Competencies of Your Business
- 7. You Can Assure That You Are Paying the Best Salary Rates
- 8. Government Support
- 9. Ability to Multi-task Efficiently
- 10. Infrastructure Development
- What are the Accounts that BPO Companies have in the Philippines?
- Top Business Process Outsourcing Companies in the Philippines