After some time and after a lot of hard work, your business is growing, and you can’t seem to handle the heavy workload. Although this is a clear sign that your business is flourishing, you might have thought about adding new members to your team to maintain productivity and efficiency. Hiring the right people is time consuming and you would not want this to be another problem you have to face. After doing research, you might have seen that the best option to solve this issue is to outsource or offshore your team members. But which is which?
Outsourcing and Offshoring are two terms which are often used synonymously or interchangeably. This is a common confusion in the business world and must be defined accurately because they are two things that are very much different – industry and business wise. So, what really is the difference between the two?
OUTSOURCING is the process of transferring all or specific internal operations and contracting it to a third-party who is an expert in a specific service or product. Most businesses outsource operations like computer programming work, IT work, virtual assistant work, and the like. One of the unique traits of outsourcing that sets it apart from offshoring is OUTSOURCING can happen in the same country where your business is in. You can be in the United States and still choose to transfer internal operations to a third-party entity who is also located in the United States. Companies choose to outsource for two main reasons: to reduce cost for internal operations and to focus or improve on the company’s core function. Usually, businesses who opt to outsource have no control over their employees. A middleman is usually present as the common point of contact between client and employee.
A famous company who is known to outsource its workers is Google, the biggest internet related provider of different services and products. Google have been outsourcing almost all their internal operations; from virtual assistants, IT, development, and others.
OFFSHORING may seem like outsourcing because of few similar functions but they are not. In offshoring, it is the process of moving your business to a foreign location, usually in countries where labor cost, production cost, and economy is cheaper. Unlike outsourcing, businesses who choose to offshore still have managerial control over their employees. This means that they are pretty much involved in the recruitment process and in the general operation.
Apple, of the most famous multinational technology company in the world has been offshoring their manufacturing operations in China. The main reason is China is known to have factories with abundant supply of labor force who can manufacture in a short period of time which the USA cannot simply do.
Similar as it may seem, it is now clearer that they are two completely different things and serves two different objectives and functions to businesses.