After the COVID-19 pandemic around the globe put a strain on people’s movement, an increasing number of businesses are turning towards high-tech solutions and on the lookout for reliable outsourcing partners to ramp up their games.
In this article, we’re going to shed light on the difference(s) between outsourcing and offshoring and the introduction to both terms.
For a simple rule of thumb, this is the relation between the 2 terms
We do the work here
We do the work in foreign countries
Someone else does the work here
Someone else does the work in foreign countries
What is Outsourcing? What is Offshoring?
Outsourcing came from the phrase outside resourcing. Unlike insourcing – where work is done by in-house staff members, outsourcing involves a third-party company that produces entirely, or part of, a product or service.
Offshore is simple something away from your own country, whereas onshore means in the same country. Nearshore is a related term that means offshore but very near, usually shares the same time zone/ culture/ language or minor differences.
When speaking of outsourcing, people usually think of a provider who sits in a different country. However, it can be at, near, or far away from the company’s host country. Also, when we think offshoring, we usually assume outsourced, which is not necessarily the case.
For example, for an American business, their definition of onshore, nearshore, offshore would be like this image:
Depending on the geographical differences between the outsourcers and the outsourcees, there can be same or different time zones—with time gaps that barely exist, or range from a few hours to a day.
In short, the main criteria for offshore is whether the operation happens domestically or abroad. In contrast, the main criteria for outsourcing is whether the operation happens in the same business or not.
A company can outsource without offshoring when the outsourcees are located in the same country—which is called onshore outsourcing, which allows it to focus on its core business.
A company can offshore without outsourcing when it opens a new office/ branch in another country, which allows it to reach a new market/ talent pool.
Finally, offshore outsourcing happens when the distance between the two parties is vast from one another. A special version is nearshore outsourcing, typically when the company offshores to a neighbor country, usually with neglectable differences in timezone and culture.
Despite the significant differences in time zones, it is oftentimes the ideal choice for many businesses “to leverage cost advantages” and to make the most use of their time, having the offshore teams working when the outsourcers are asleep. This kind of outsourcing makes sure the projects are constantly tended to around the clock.
How do companies outsource actually?
In the world, there are many types of products and services being outsourced. From as technical an industry as data security or software development, to as creative a field as content writing & proofreading or video editing.
Depending on the types of products or services being outsourced, the company normally look for a partner that best fit its product vision and budget.
A company may choose to work with a co-located partner for a service that demands meticulous local understanding—such as writing and editing important legal documents.
Meanwhile, it can choose to work with an offshore partner on products that demand skills and global insights that cannot be sourced in-house or locally—such as building a mobile application targeting a worldwide group of users.
Offshore outsourcing’s role in the era of increasingly technology-dependent world
The prolonged (and so far incurable) COVID-19 pandemic around the globe has put a strain on people’s movement and prompted an increasing number of businesses to turn towards high-tech solutions. Indeed, the outbreak has compelled them to be on the lookout for reliable outsourcing partners to step up their games.
There are some apps you are probably using right now that you don’t think have been offshored, such as Google, GitHub, Skype, Slack, WhatsApp.
It’s easy for people to have some preconceived misconceptions around outsourcing. However, if outsourcing doesn’t lend itself to leveraging these giants’ effectiveness and efficiency on an international scale, for sure, they would never opt for outsourcing in the first place.
A study by Deloitte has shown that nearly 80% felt positively about their relationships with outsourcing providers.
In this article, the definitions of outsourcing and the terms under its umbrella, including onshoring, nearshoring, and offshoring, are introduced. With it, we hope you can now distinguish the differences among them.
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