How To Choose Between Offshoring and Outsourcing

29 Jan 2021

As more businesses see the benefits of having a remote team, developing a strategy around it is necessary. In the modern business world, outsourcing is one of the most common approaches to this. However, some look at what they want from outsourcing, only to see that they preferred an offshoring approach instead. As a whole, it can be easy to confuse, even misunderstand these two different concepts. We hear buzzwords about them like staff leasing, offshore recruitment and business process outsourcing. Currently, both offshoring and outsourcing offer the option to either work from home or to an office facility they report to every day.

Companies use offshoring and outsourcing to minimise costs by working outside their local teams. However, both these approaches have key differences that businesses should be aware of. Differentiating the two is vital, especially when you consider needing to outsource a specific project or to have a full time staff working offshore.

Outsourcing in a Nutshell

Outsourcing’s reputation centers around it being a low cost, alternative labour approach for companies. Countries like India specialize in outsourcing as it is a more general and much broader option for companies. For instance, clients pay outsourced teams based on the end result of their objectives. This means that clients have no control over elements such as choosing their staff or their selected roles. They may not also have a hand in directly managing them. In doing so, the service provider retains full control of staff members they selected. They can also opt to change who is assigned to a client at any time.

Overall, outsourcing is still a viable option for companies that want results done on a fixed schedule. The option for having easily changeable staff means improving the quality of work almost immediately.

Offshoring as an Alternative

Recently however, more businesses are seeing why offshoring – meaning working closely with a remote team – is much more viable. The biggest difference is that offshoring allows them more control over the team they hire to be part of their company. Unlike outsourcing, offshoring means being involved in the recruitment process of their team. This can be as simple as assisting in the staff selection process or acquiring full offshore services. This encompasses staff training, strategy assistance, IT and HR support and the provision of office facilities.

With this in mind, offshoring believes more in staff retention and cultivating the skills they bring. Unlike outsourcing, offshoring is about the long term and making their remote team as much a part of their local one.

Reaping Offshoring Benefits

2020 saw major economic disruptions due to the global pandemic. There were major impacts on operations, with financial forecasts thrown into disarray. Several companies are looking to rebound this year as they rethink their business strategies amidst a “new normal”. Even during the pandemic, the benefits of offshoring became prevalent. The reduced cost on labour enabled many businesses to remain competitive, while retaining full control and cost transparency over their operations.

People photo created by tirachardz -
High performing offshore teams can be based in the office or at home.

By reducing overhead costs, businesses can redirect their resources to their local workforce to focus more on core competencies. increase productivity, create more jobs and to prioritise revenue generating tasks.The unpredictable and excessive fluctuations in the economy – especially during the global pandemic – was a wake up call for companies in maintaining the cost of local activities. Businesses can stay competitive through offshoring by offering highly valued services and provide effective service level tasks with flexible work schedules. This leads to increased efficiency, enhanced operational procedures in delivering quality service.

So What Works?

With all this in mind, the question still remains on what businesses should consider. As discussed earlier, outsourcing and offshoring both work as effective cost saving approaches. However, offshoring also allows more transparency and control over the staff they select for their team while maintain competitiveness. In doing so, companies are free to explore new business models and opportunities. With the help of modern technology, companies can further ensure quality in what they offer by making sure that offshored inputs meet their own quality standards.

Of course, no business model is perfect. Offshoring, like any other strategy, also has some disadvantages. It is not just to cut costs or be a replacement for your local staff. Rather, it is an augmentation of your current team for the further growth of your business. Companies that adopt an offshoring approach will be the first to tell you that no strategies are alike. With the right provider, they operate on a customised offshoring approach without disrupting ongoing operations.