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Outsourcing vs. Offshoring: Which One Is Right for Your Business?

In the past two decades, the word “outsourcing” has almost become a buzzword globally. After all, many companies, from startups to industry giants, have taken advantage of this business model to thrive.

As a company owner, the thought of being able to make it big through outsourcing is exciting. However, if you are new in the trade, there are some misconceptions that must be clarified first before you start partnering with an outsourcing company.

One of the most common mix-ups is the difference between outsourcing and offshoring. Through this article, you will gain clarity on how these two terms are seemingly similar, yet fundamentally unlike from one another.

What Is Outsourcing?

Outsourcing is about transferring the internal operations of a company to a third party vendor. There could be crucial yet repetitive processes in your business that can be done by an outsourced company. Through outsourcing, you will be able to focus your time and energy on more important things such as developing new products or expanding your business.

How Is Outsourcing Different From Offshoring?

In its broadest sense, offshoring means getting work done in a different country. From a business standpoint, offshoring shares a lot of common benefits as with outsourcing such as cost savings, access to a wider talent pool, and flexibility. However, there are some key differences.

Talent Acquisition. In outsourcing, the client has no control or say in hiring or managing outsourced workers. This is because talent acquisition and management are both handled by the third party company. When it comes to offshoring, conversely, the client has direct managerial control over the hired employees and is much involved in the recruitment process.

Location. Outsourcing may be done within or outside the country. On the other hand, offshoring may only be done outside the country.

Function. The outsourced transactional activities are typically done by external or non-employees. These are workers whose expertise are only needed based on the project type and duration. In offshoring, the daily operations of a client’s business is done by the actual employees of the company itself.

Which One Do I Need?

Before you can answer this question, you will have to perform a thorough analysis of your business first to determine both its strengths and opportunities for improvement. There are several factors that must be considered, from the nature of your business and the type of solutions you offer to the size of your company and the complexity of tasks that can be offshored or outsourced.

There is no doubt that either of these two approaches can make it possible for your business to focus on its core processes.

If you are looking for a digital outsourcing partner in the Philippines, reach out to KDCI today!


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