The difference between outsourcing and offshoring

The difference between outsourcing and offshoring

There is a common misconception that outsourcing and offshoring mean the same thing. However, there are some important differences between these two methods of working that can influence how you want to manage external workforces. Here we explain more about the difference between outsourcing and offshoring so you can make the right decision for your business.

How does outsourcing work?

Work management

Outsourcing involves work being sent to staff who are not employed directly by your company, which means it could be completed by freelancers that invoice you, or more commonly, through an agency who will complete the task using their own staff. The company outsourcing the project will set the brief and overall requirements, which will then be managed by the third party until completion. It’s a service we provide at Teamin, which can also include the recruitment process.

An outsourcing arrangement is focused more on your relationship with the provider than it is with the workers themselves. The provider will be responsible for delivering to the set criteria of the project, which makes it much easier to communicate with one entity instead of managing multiple individual workers.

Benefits of outsourcing

  • You don’t have to worry about investing in new offices, equipment and other infrastructure to get things started.
  • Access to a wide range of skills and resources that are all managed and assessed by an approved third party. This includes everything from office admin support to finance and more.
  • With so many more skills at your disposal it becomes easier to find the right talent at the right price.

Disadvantages of outsourcing

  • You won’t have as much control over the work as you would with a direct employee. Establishing trust and a long-term relationship with a reliable third-party provider will go a long way to easing these concerns.
  • Communication can sometimes be an issue but it can be easily avoided with good planning and ensuring your outsource partner makes this a priority.

How does offshoring work?

Offshoring works in a slightly different way to outsourcing. By using an offshore service provider, you can directly outsource specific parts of your business to another country.

Once the service provider has been hired, they will then hire staff that will serve as a dedicated remote workforce for your business. This means they effectively operate as an extension of local staff within your organisation and can also be managed in the same way. You have full control over hiring and firing and work quality expectations can be kept in line with local standards.

Benefits of offshoring

  • Comparatively, offshore labour costs are usually lower than local costs, offering the opportunity to increase revenue and maximise profit.
  • Operating in a different time zone can enable you to operate 24/7, which can give you a competitive edge

Disadvantages of offshoring

  • You will have to invest in new infrastructure and equipment, which means it takes longer to see a return on your investment.
  • Quality control can be a major issue, as you need to ensure standards are maintained to the requirements of your business.

While working in a different time zone has its benefits it can also be disadvantageous as it can be difficult to align schedules, affecting communication and management.

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