outsourcing vs. offshoring

Outsourcing Vs. Offshoring: The Crazy Truths You Should Know About

Have you ever wondered what the difference is between outsourcing and offshoring? You’re not alone. Many people don’t know the answer, and even those in the industry can be a little fuzzy. So today, we’re going to clear all that up for you. We’ll define outsourcing and offshoring, explain the benefits and drawbacks, and help you decide which option is right for your business. Sound good? Then let’s get started!

Yeah, We Know; it’s Confusing.

man confused with many thoughts

When it comes to outsourcing and offshoring, there are a lot of myths and misconceptions floating around. For example, some people think that outsourcing is the same as offshoring or that offshoring is always cheaper than outsourcing. 

In reality, there are a lot of factors to consider when deciding whether to outsource or offshore your business operations. Here we’ll look at the critical differences between outsourcing and offshoring, so you can decide which is suitable for your company.

What You Should Be Aware of

the phrase be aware on a pin board

When you say outsourcing, what comes to your mind? For many, outsourcing is simply the delegation of work to freelancers or other businesses. Meanwhile, they perceive offshoring as a way for companies to hire workers in other countries.

Although both outsourcing and offshoring have gotten bad press in recent years, the truth is that they can both be beneficial to businesses if used correctly. First, look at the outsourcing definition and offshoring meaning to understand how they differ.

Outsourcing

outsource

Outsourcing is the process of delegating work to outside contractors or service providers. When outsourcing, businesses contract with third-party companies to provide services that are not core to their operations.

Outsourcing is often used as a cost-saving measure because it can be cheaper to contract with a third-party company than to hire full-time employees to do the same work. Additionally, outsourcing can free up internal resources so businesses can focus on their core competencies.

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Types of Outsourcing

lightbulb with the word outsourcing

There are a few different types of outsourcing arrangements, including:

1. Project-based outsourcing

Businesses contract a third-party company to complete a specific project in this arrangement. Once the project is completed, the outsourcing arrangement is finished.

2. Managed services outsourcing

In managed services outsourcing, businesses contract with a third-party company to provide ongoing support and management of specific business functions. This type of outsourcing arrangement is often used for IT-related services.

3. Business process outsourcing

Business process outsourcing (BPO) is when businesses contract with a third-party company to handle an entire business process, such as customer service or accounting. BPO arrangements are typically long-term contracts.

Now, let’s dig in and see the outsourcing pros and myths vs. the truth.

The Crazy Pros of Outsourcing

man holding a paper with outsourcing written on it

1. Cost Savings

cutting coins as a representation of cost saving

The most common reason businesses outsource is to save money. When you outsource, you don’t have to pay for the overhead associated with full-time employees, such as benefits, vacation time, and sick days. Additionally, outsourcing companies can often get a lower rate because they can spread their overhead costs across multiple clients.

Example:

A company needs customer service support but doesn’t want to hire full-time employees. Instead, the company outsources its customer service functions to a third-party company that specializes in providing customer service support. The outsourcing company can offer the same customer service support for a fraction of the cost of hiring full-time employees.

2. Increased Efficiency

Outsourcing can also increase efficiency because outsourcing companies specialize in their services. This specialization allows them to complete tasks more quickly and efficiently than businesses that don’t outsource. Additionally, outsourcing companies often have access to better technology and resources than businesses that don’t outsource.

Example:

The same company from the previous example outsources its accounting functions to a third-party company that specializes in providing accounting services. As a result, the outsourcing company can complete the company’s accounting tasks more quickly and efficiently than the company could on its own.

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3. Focus on Core Competencies

your core competence written on a chalkboard

Outsourcing can also help businesses focus on their core competencies. When companies outsource non-core functions, they can focus on the areas of their business that are most important to them. This focus can lead to increased efficiency and profitability.

Example:

A company outsources its manufacturing operations to a third-party company. Outsourcing allows the company to focus on its marketing and product development competencies. The company can increase its efficiency and profitability as a result.

4. Risk Reduction

Outsourcing can also help businesses reduce their risks. When businesses outsource, they often transfer the risks associated with the outsourcing services to the outsourcing company. This transfer of trouble can help enterprises to protect themselves from potential losses.

Example:

A company outsources its human resources functions to a third-party company. The outsourcing company is responsible for complying with all applicable laws and regulations. However, if the outsourcing company fails to comply with the law, the company is not held liable.

5. Access to Talent

Talent with magnifying glass

Outsourcing can also give businesses access to the talent they wouldn’t otherwise have. When businesses outsource, they can choose to work with outsourcing companies with access to a global talent pool. This access can help enterprises to find the best possible employees for their needs.

Example:

A company outsources its recruiting functions to a third-party company. As a result, the outsourcing company has access to a global talent pool. As a result, the company can find the best possible candidates for its open positions.

6. Flexibility

Outsourcing can also give businesses more flexibility. When businesses outsource, they can choose to work with outsourcing companies that offer a variety of services. This flexibility allows businesses to scale their outsourcing services up or down as their needs change.

Example:

One company might outsource its customer service to a third-party company, while another might outsource its manufacturing to a country with cheaper labor costs. Of course, outsourcing and offshoring have pros and cons, so it’s essential to understand the differences before deciding which is right for your business.

Myths and Misconceptions About Outsourcing

wooden cubes stacked forming the word Myth

Without busting some myths about outsourcing, we can’t complete this outsourcing vs. offshoring guide! While Outsourcing offers so many benefits, we can’t avoid but be misguided by these outsourcing myths. So let’s break them down one by one.

Myth 1: Outsourcing Is Always Cheaper

One of the most common myths is that outsourcing is always cheaper than doing the work in-house. Unfortunately, this myth is not valid. While outsourcing can save businesses money, it’s not always less expensive than doing the work in-house.

The Truth:

The cost of outsourcing depends on various factors, such as the type of work being outsourced, the outsourcing company’s location, the outsourcing company, and the size of the outsourcing company. Therefore, businesses should compare the costs of outsourcing to the costs of doing the work in-house before deciding whether or not outsourcing is right for them.

Myth 2: Outsourcing Means Losing Control

man struggling to control his umbrella

Another common outsourcing myth is that outsourcing means losing control. This myth is also not true. When businesses outsource, they often have more control over their operations than they would if they did the work in-house.

The Truth:

When businesses outsource, they can choose to work with outsourcing companies that offer a variety of services. This flexibility allows businesses to scale their outsourcing services up or down as their needs change. Businesses can also choose to discontinue their outsourcing arrangement at any time.

Myth 3: Outsourcing Is Only for Big Businesses

Another common outsourcing myth is that outsourcing is only for big businesses. This myth is also not true. Outsourcing can be an excellent option for businesses of all sizes.

The Truth:

While big businesses often use outsourcing, it’s not limited to them. Outsourcing can be an excellent option for small businesses that don’t have the resources to do the work in-house.

Myth 4: Outsourcing Means Moving Jobs Overseas

visa approved for traveling overseas concept presentation

Another common outsourcing myth is that outsourcing always means moving jobs overseas. This myth is also not true. Outsourcing can involve moving jobs overseas, but it doesn’t have to.

The Truth:

Outsourcing can involve moving jobs overseas, but it can also include contracting with a third-party company to do the work in-house. Businesses should consider all of their options before deciding on outsourcing.

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Final Thoughts

arrows with outsourcing

We should always research what’s real and what’s not. But unfortunately, these myths exist, and they are misleading a lot of people. Outsourcing can be an excellent option for businesses, but it’s essential to understand the difference between outsourcing and offshoring before deciding which is right for your business.

Offshoring

wooden cubes with offshore inscriptions on money bills

Offshoring is the process of moving business operations to another country. The primary reason businesses offshore are to take advantage of cheaper labor costs in other countries.

When offshoring, businesses typically set up subsidiaries or joint ventures in the country where they want to do business. This allows them to control their operations while benefiting from lower labor costs.

Types of Offshoring

offshores concept on a chalkboard

There are a few different types of offshoring arrangements, including:

1. Captive offshoring

In captive offshoring, businesses set up subsidiaries or joint ventures in another country. This arrangement allows companies to maintain complete control over their offshore operations.

2. Outsourcing Offshoring

outsourcing Offshoring is when businesses contract with a third-party company that already has operations in the desired country. This arrangement is often used to save on costs associated with setting up an offshore subsidiary or joint venture.

3. Greenfield offshoring

Greenfield offshoring is when businesses build their operations from scratch in another country. This arrangement allows companies complete control over their offshore operations but can be more expensive than other offshoring arrangements.

The Crazy Pros of Offshoring

man pointing at a map representing offshoring

1. Access to Global Pool of Talents

You have access to a global pool of talents when you go offshore. This is especially beneficial if you’re looking for specific skillsets that are hard to find in your home country.

Example:

Let’s say you’re a tech company based in the United States and you’re looking for software engineers with experience in a specific programming language. If you were to only hire within the United States, you would have a limited pool of candidates. However, if you were to go offshore, you would have a much larger pool of candidates to choose from. 

2. Depletion of Operating Costs

cost

One of the main reasons companies offshore is to take advantage of cheaper labor costs. In many cases, you can find workers willing to do the same job for a fraction of the cost.

Example:

Let’s say you’re a company that manufactures t-shirts. You could hire workers in the United States to sew the t-shirts, which would cost you $15 per shirt. Or, you could go offshore to a country like China, where workers would only charge you $5 per shirt.

Offshoring is a significant way to reduce costs, but it’s important to remember that you get what you pay for. What do you think? Does it make a big difference? Let us know your thoughts by giving us a shout on social media or in the comments below.

3. Increased Flexibility and Scalability

Offshoring can also provide your business with increased flexibility and scalability. This is because you can quickly ramp up or down your team size depending on your business needs.

Example:

Let’s say you’re a seasonal business and only need extra help during certain times. If you hire employees in-house, you would have to pay them even when business is slow. However, if you were offshore, you could quickly ramp up your team during busy times and let them go when business slows down. This would save you a lot of money in the long run.

4. Improved Focus on Core Business Activities

business activity diagram

Offshoring can also help improve your focus on core business activities. This is because you can delegate non-core tasks to your offshore team and free up your time to focus on more important things.

Example:

Let’s say you’re a small business owner trying to grow your business. You might not have time to handle all the little tasks like customer service, accounting, and website maintenance. However, if you were to offshore these tasks, you could focus on more important things like marketing and sales. This would help you grow your business much faster in the long run.

What do you think? Are you convinced yet? Offshoring can be a great way to save money and focus on your core business activities. First, however, it’s essential to research and ensure you’re outsourcing to a reputable company. Otherwise, you might end up with subpar results.

Contact us if you’re thinking about outsourcing or offshoring your business. We would be happy to discuss your options and help you make the best decision for your business.

Myths and Misconceptions About Offshoring

myths word on wooden cubes

Myth 1: Offshoring is TOO Expensive

You’ve probably heard that offshoring is too expensive, and that’s why companies don’t do it. But unfortunately, this is just one of the many misconceptions about offshoring.

The Truth:

Offshoring can save you a lot of money. This is because you can find workers willing to do the same job for a fraction of the cost. In many cases, you can see workers eager to work for less than minimum wage.

Myth 2: Offshoring is Unsafe

unsafe to safe concept

You might also be worried about the safety of offshoring. After all, you’re sending your work to another country without knowing if it will be done correctly.

The Truth:

Offshoring is safe. This is because you can easily find reputable companies to outsource your work. In addition, you can also set up a contract that outlines the expectations and deliverables. This will help ensure that your work is done correctly and that you’re satisfied with the results.

Myth 3: Offshoring Is Not Good for the Economy

Many people believe that offshoring is terrible for the economy. They think companies are outsourcing jobs to other countries and taking away opportunities from American workers.

The Truth:

Offshoring is good for the economy. This is because it creates new jobs in other countries. In addition, it also helps companies save money, which they can then reinvest in the economy.

Myth 4: Offshore Workers are Underpaid and Exploited

woman feeling tired for overworking

Many people also believe that offshore workers are underpaid and exploited. They think that companies are outsourcing work to other countries because they can get away with paying workers less.

The Truth:

This is not true. In most cases, offshore workers are paid fairly. In addition, many companies offer benefits and perks to their offshore workers.

Final Thoughts

word cloud about offshore company

Though it may sound too good to be true, offshoring can be a great way to save money and focus on your core business activities. First, however, it’s essential to research and ensure you’re outsourcing to a reputable company. Otherwise, you might end up with subpar results.

If you’re thinking about outsourcing or offshoring is a great option you cannot miss; getting in touch with us to help you learn more about these fantastic offers would surely help! Be sure to not miss every news and update by subscribing!\

Are You Considering Outsourcing or Offshoring?

The debate between outsourcing and offshoring has been around for quite some time. And it’s likely to continue for many years to come.

Outsourcing and offshoring have been around for a while, and there are plenty of myths and misconceptions about them. So what’s the truth? Are they worth it? Let us know your thoughts in the comments below! 

If you need help deciding whether outsourcing or offshoring is right for your business, WowVisible is your best bet. With experienced outsourcing and offshoring experts, we can help you make the best decision for your business. 

Call us online or dial +63 032 273 7051 to learn more about our other services.

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