Offshoring and Outsourcing Insights: Determining Better Cost Saving Strategy 

August 18, 2020

How can we determine the difference between offshoring and outsourcing?

The terms 'offshoring' and 'outsourcing' frequently arise in business discussions, and they’re often used interchangeably. Although both of them occupy common ground in terms of sourcing — putting the right people for the job in place by means of a third party, are they truly synonymous?

We’re going to define their differences and explain how they serve different purposes in talent acquisition, recruitment processes, and aligning with your business needs and objectives.

In a 2019 article for American Banker, Aimee Lucas captured the essence of employees’ value: “Employees are at the heart of any organisation,” she wrote. “When they're engaged and aligned with the company’s goals, their actions can profoundly uplift the business.”

These days, when talking about employees and employment and terms come up such as BPO, offshoring, outsourcing, remote solutions, managed services, and virtual assistants, many people instinctively think of 'telecommunications'. We visualise long calls, being transferred between operatives, and enduring protracted and time-consuming resolutions. Sometimes the longer it takes, the more dissatisfied we become with the service. However, there's undeniable convenience to be had for businesses in using an external party to efficiently handle specific operations, particularly if the process is managed by an experienced provider who can recruit staff with the right skills to work successfully for your business.

Many organisations have the misconception that 'outsourcing' and 'offshoring' are the same. While both concepts aim at enhancing business efficiency and productivity, they differ fundamentally in execution and intent.

What is the difference between outsourcing and offshoring? And how can they both convince you to decide to optimise your business operations?

Outsourcing

Outsourcing involves engaging a third party — either domestically or abroad (for instance, in the Philippines) — to undertake specific tasks, with the outsourcing provider managing operations and staff. Outsourcing occurs anywhere in the world; a business can outsource locally or internationally. The core principle? Outsourcing providers lend their expertise and expect clients to adapt to their established procedures. For instance, if your business requires additional call centre staff, an outsourcing company will provide personnel who operate based on their systems, protocols, and work culture; they prioritise quick resolutions and a high volume of calls.

An outsourcing company employs staff to work for you but they may not be exclusive to your business. Say, your company aims to hire staff for specific roles, you might outsource that work to a foreign company or send that same work overseas.

Offshoring

Offshoring offers a more integrated approach to business strategy by establishing a dedicated team for your business in another country, such as the Philippines. These team members adopt your systems, adhere to your policies, and function under your management. Overall, they become an extension of your local team. While they might be recruited with the assistance of an offshoring partner, they align with your company's values, culture, protocols, and objectives.

Offshore staff focus on pivotal activities, which eases your management responsibilities and frees up time for you to address important business issues. Your offshore staff work in alignment with KPIs and a clearly defined job description, which not only helps to give you complete control of your offshore staff but also enables you to see your organisation in terms of the bigger picture.

In essence, while outsourcing is about leveraging external expertise, offshoring is about extending your company’s presence and values to another location.

For a clearer understanding of how both options can enhance your business operations, the table below offers you some guidance in determining which of them best suits your company’s strategy:

Find out more here about optimising your business for growth and transformation through sustainable offshoring.