Outsourcing and Offshoring What’s the Difference

1. Outsourcing and Offshoring: What’s the Difference? The terms outsourcing and offshoring are often used interchangeably but they are quite different. However, these two strategies can help businesses grow and allow business owners to focus more on core functions in order to adjust and maintain a firm stand especially in the fast-changing business industry. While both provide cost-effective services that help businesses gain growth and success. Both established and startup companies benefit from these two business strategies. In this article, we’re going to talk about the difference between offshoring and outsourcing. We’re also going to explain the benefits of each business strategy. This will give you an idea of whether should you start finding the right service provider in order for your business to keep up with the rapid changes of the business world. What is Outsourcing? Outsourcing is a business strategy that refers to the contracting out of a non-core business function, a certain project, or campaign, to an external provider. There are several reasons for companies why they choose to outsource some of their business functions. We’ve listed some of the benefits this business strategy provides, which include the following: ● Cost-effectivity Preferably the main reason why companies tend to outsource. Costs are arguably the main motivation behind outsourcing as most companies find that handing out certain business functions to a third-party service provider is a lot cheaper than doing it in-house. ● Focusing more on the Business’s core functions Handling over non-core functions to a service provider enables owners to focus more on their business’s core functions. This makes them work more efficiently in solving core issues, providing relevant suggestions and apply clear decisions of what to do in order to prevent or avoid business risks. ● Quality and Capability One of the main reasons why companies outsource is the lack of in-house expertise for certain business functions. In this case, Outsourcing business functions to a service provider have proven great results, particularly in products and services that tend to be of higher quality when provided by third-party service providers. What is Offshoring?

2. Offshoring refers to getting work done in a different country. It’s a business process usually done by third- party service providers overseas, hence, the word offshore. This business strategy provides a cheaper solution especially if you’ve chosen to outsource business functions in countries that provide services at a more relatively low price without risking the quality of deliverables, such as the Philippines. Benefits of Offshoring Offshoring provides businesses many of the same benefits as outsourcing, we’ve listed some of the most common benefits of the business process which include the following: ● Cost savings Companies commonly offshore non-core business functions to developing countries such as the Philippines, where wages are low. This results in cost savings which are far cheaper than paying an in-house staff. ● Skills and Labour Flexibility Some countries develop a much better space for certain types of industries. This means there is better availability of skilled people in that country for specific types of tasks. Take the Philippines for example, the country has a large pool of English-speaking, college-educated youth, and mature training infrastructure; that makes the country ideal for BPO. In this case, many foreign companies choose to offshore certain business functions such as customer support or digital marketing to the country. Overview Both Outsourcing and offshoring are on the rise, especially in 2020. The global crisis has formed companies to explore all options to increase efficiencies and cut costs. This leads businesses to be more comfortable in handing over some of their non-core functions to third-party service providers. This is usually common in IT industry-related companies that provide service digitally or virtually.