More often than not, growing companies find it better to delegate business processes outside of their immediate company. This frees up time and offloads work to the experts. Both offshoring and outsourcing providers are here for this exact purpose, but most do not know the difference. Even so, in both approaches, businesses can focus on their core workload without worry.
So, what exactly is the main difference between offshoring and outsourcing? First, let’s talk similarities. After all, there is a reason why people use both terms interchangeably.
The Basics of Offshoring and Outsourcing
The easiest way to put it is that in both offshoring and outsourcing, business processes for a company are done elsewhere. There are different reasons as to why people avail offshoring or outsourcing services. The most common is cost-effectiveness for growing businesses. But there is also the benefit of having a wider reach. Talent and skill exist globally, so it’s best to extend your market and forge connections from different cultures.
The specific arrangements are where things start to differ. Breaking down the word “outsourcing” means you are sourcing something – a business process in this instance – outside of your immediate company. In outsourcing, the employees doing this process do not do the work for you, but for the contracted company. You are hands-off and hands-free from this area of work.
Offshoring, meanwhile, means your company has business processes done offshore. Companies usually partner with an offshore provider, a service based in the country you want your operations done. They help source talent to form an offshore team. It’s like having an onsite team but they’re somewhere else.
With that, let’s take a look into the differences between offshoring and outsourcing through three specific aspects of a business.
Talent Acquisition
The hiring process may be the most subtle yet significant difference between offshoring and outsourcing. The key is in the details of the hiring process. There is anonymity in outsourcing that directly juxtaposes the more hands-on approach in the offshore hiring process. While neither are superior to the other, they have wildly different approaches.
Offshoring is Hands-on, Outsourcing is Hands-off
Outsourcing has a level of distance for you and the employees as they are not entirely integrated into your company. Therefore, the only one involved in the hiring process is the outsourcing provider. The team that does your tasks are essentially anonymous to you; it is less of a stressor. More often than not, providers already have a pool of employees who will take on the task that you need done.
A key benefit of the hiring process in outsourcing is scalability. Outsourcing temporary business processes is so easy as you can flex up and down your needed staff during peak or busy seasons of the year such as holidays or tax season.
When it comes to offshoring on the other hand, you are completely involved in the hiring process. The selection of your offshore team is based on your list of necessary skills and experiences. The client is involved in the selection and interview process for a better relationship with their offshore team.
The client can also customize the onboarding process. Your offshore team will undergo an onboarding that explains your company culture, ethics, and goals. This also means a customization of your offshore team. You can plan an overall readiness strategy to ensure that your team will be successfully implemented. From the hiring process to the onboarding and the subsequent training that you can request for your team. Overall, it has the same steps as hiring an onsite employee. The key difference is that they are offshore, and you have a point person to help you through the process.
Management & Involvement
Your involvement in work management differs between offshoring and outsourcing as well. How both industries structure their processes is always dependent on client involvement. One provides an automated approach, the other provides further customization. Regardless, it will always depend on your company’s current needs.
The Difference is Development and Automation
There is minimal management on your end when using an outsourcing provider. Usually, the provider is the one to delegate the task rather than the client assigning a specific team. There is always a middle person who handles the delegation for you.
However, your contact with staff is usually through an appointed person. They handle the assigned team, so it may be difficult to keep tabs on work progress. While outsourcing is praised for its automated-like services, it’s not an entirely hands-off approach. You will get the most out of your outsourcing provider by treating their services like a partnership rather than a product. Ask for updates on work progress, input on how to accomplish the task better, updates on innovations in their field, and other questions that can keep you in the loop.
On the other hand, think of an offshore team as your onsite staff but in a different location. You can manage them as you want, talk to them, provide specific instructions on how you want things done based on your company’s culture, policies, and processes. They are part of your group as much as any other employee you see on a daily basis. But it is the offshore provider who handles everything from equipment to pay slips.
This also means you have a say in the overall development of your team. By requesting specific training programs or workshops, you can oversee how your offshore team can progress through industry changes and even invest in their personal growth.
Work Output Quality
The quality of output will likely depend on the providers themselves. Any difference between the quality of work for offshoring and outsourcing providers will always depend on whose services you will hire. It will never be a uniform and structured experience everywhere therefore its best to do thorough initial research. That said, the main difference is staff workload and collaboration. Still, you get to offload work and focus on the core responsibilities for your business in either service.
Offshoring and Outsourcing Provide Quality Work
In outsourcing, cost is reduced without sacrificing consistency in a process that feels automated. Tasks are properly delegated in your requested volume, with minimal participation on your part. That said, this same team may be handling tasks from other clients with varying priorities which may affect quality or production schedules.
Still, a large selling point for outsourcing is the flexibility of said team. Outsourcing providers already have teams and staff at the ready whenever you need to increase or decrease workload without sacrificing quality. This could be during peak seasonal time or simply as your company expands.
Consistency and dedication to output is where offshoring shines. The offshore team formed is dedicated solely to your company. Which means you have a say on how they do their tasks, what programs to use, or even how they can improve through training.
A key difference between the two that may or may not favor offshoring is collaboration. Having an offshore team leans toward collaboration when compared to outsourcing. You will be working with staff who have input and will listen to your feedback in turn; much like an onshore team.
Different Structures for Different People
Overall, neither are superior to the other. Both offshoring and outsourcing are beneficial to any company. They can help you scale up considerably better as you grow your business. Task delegation becomes easier, and you can source talent from all over the world.
The key difference is to consider what will work best for your company. Most view outsourcing as a seasonal or at least temporary solution for a growing company. Meanwhile, offshoring can be a permanent investment to a company who wants to expand their reach. Either way, it’s always better to know what will work best for you and your company moving forward.
