Outsourcing and offshoring – What’s the difference?

4 Feb 2014

The use of offshore white collar labour is a relatively recent thing. As a result, there has been a range of different terms which have quickly developed to explain the different types of services on offer. These terms include outsourcing, offshoring, staff leasing, remote staff, offshore staff and business process outsourcing to name just a few.

Outsourcing vs. Offshoring

The general concept of using offshore labour however can be broadly broken into two different offerings. The first of those offerings is probably best described by the term “outsourcing.” Outsourcing is where a third party service provider is engaged to provide a range of services in accordance with a pre-agreed service level agreement. The amount to be paid to the outsourcing provider is often linked to outcomes achieved. The client does not typically have any involvement in the selection of the staff to perform the functions nor do they have any direct managerial involvement or control over those staff. The staff are solely under the direction and control of the outsourcing services provider and can be changed without regard to the client.

Offshoring on the other hand is where an intermediary is involved who is based offshore and assists a client directly engage local staff. Whilst the contracting arrangements may be a little bit more complicated, the essence is that the client will usually have direct managerial control over the staff and will also be involved in the recruitment process selecting which staff will be working for them. The services provided by the intermediary can range from simply assisting with recruiting of home-based employees right through to a full-service offering which also includes training, assistance with strategy, human resource management support, IT support and the provision of office facilities.

Whether offshoring or outsourcing is right for a particular business depends entirely upon what that business seeks to achieve through the engagement of its offshore labour.