Offshoring vs Outsourcing: What Are the Differences?

Offshoring vs Outsourcing

Offshoring and outsourcing are two words that are often used interchangeably within the business world. But if you own a company, you should know that offshoring and outsourcing are not one and the same. They’re two completely different concepts.

So, what are the differences between offshoring vs outsourcing? You need to have a good understanding of each of them so that you’re able to use them effectively if need be.

We’ve put together an offshoring vs outsourcing guide that should help you comprehend what each of these things is. Check it out below and keep our outsourcing and offshoring guide in mind while running your company.

What Is Offshoring?

Offshoring is a practice that involves sending at least some of a company’s jobs overseas and filling them with foreign workers. There are quite a few U.S. companies that have taken part in offshoring over the years.

Some companies will offshore their customer service operations in places like India. Others will offshore the manufacturing side of things and let someone else worry about producing their products.

In the past, offshoring has come under fire because it leads to a loss of jobs in the U.S. Oftentimes, companies will fire entire departments full of people so that they can send the jobs that these people used to do overseas, and this doesn’t always sit well with Americans.

This had led to some U.S. companies scaling back on offshoring. But there are still a lot of companies that continue to offshore in spite of the criticism that they receive for doing it.

What Are the Benefits of Offshoring?

There is a very good reason why offshoring became so popular in the U.S. over time. It’s a very effective way for companies to save money when they’re trying to trim their budgets.

By offshoring jobs to other countries, companies are sometimes able to scale back on how much they have to pay people to do certain jobs for their businesses. This helps their bottom lines in a big way.

This would explain why so many companies keep on offshoring jobs despite the fact that they catch so much heat for doing it. They see how much money offshoring is going to be able to save them, and they can’t help but participate in it.

What Is Outsourcing?

Outsourcing is a practice that involves a company hiring a third party to perform a very specific task for them. For example, a company might look to obtain outsourced IT support to assist them with all their IT needs.

More often than not, a company will use outsourcing to fill a gap in their organization. They might not have a dedicated IT department, and because of this, they’ll work with an outsourced company that can provide them with assistance.

Outsourcing doesn’t carry the same stigma that offshoring does. This is because, when a company outsources services, they’re not slashing jobs and letting go of employees in most cases when they do it. They’re simply using outsourcing to secure certain services that they can’t obtain in-house.

What Are the Benefits of Outsourcing?

Unlike offshoring, outsourcing doesn’t usually save a company a lot of money. In fact, it might end up costing them a pretty penny when everything is all said and done.

But outsourcing can help a company to get their hands on services that they might not be able to get otherwise from their in-house team. It also prevents them from having to create an entirely new department to provide them with services that they might not need all the time.

If you run a business, there will inevitably come a time when you’ll need to outsource at least some of your services. It’ll be important for you to work to find companies that can deliver the stellar outsourced services that you need from them.

Should Your Company Use Offshoring and/or Outsourcing?

Now that you have a better idea as to what differentiates offshoring vs outsourcing, you should give some thought to using one or the other or maybe even both.

Offshoring some of your company’s jobs might hurt your reputation a little bit. But at the same time, it could save you a boatload of cash and be well worth it in the end.

Outsourcing, on the other hand, will be a necessity for most companies at some point in time. You should learn to embrace outsourcing ASAP so that you feel comfortable with the idea of outsourcing services to third parties that can help you out.

Both offshoring and outsourcing will put you in a position where you’ll have to give up some control of your company’s business operations. But you won’t mind doing this at all once you’re able to see just how useful offshoring and outsourcing can be for your company.

Make Sure You Know the Differences Between Offshoring vs Outsourcing

If you don’t know the differences between offshoring vs outsourcing, it’s going to come back to bite you and your business. You might find yourself using one of these options when you should really be using the other one.

It’s why you need to keep everything you learned here about the differences between offshoring vs outsourcing in the back of your mind. It’ll help you decide which of these options would work best for your company in different instances.

Find more business-related tips and tricks by reading through some of the other articles that we’ve posted on our blog.