Offshoring vs Outsourcing: Select The Right Strategy for Your Business
The terms offshoring vs outsourcing are often used interchangeably.
Yet there are differences between them, though it is possible to do both at the same time.
What is the difference? And what are the benefits of each?
What is Outsourcing?
Outsourcing is the process of moving a business function out of your organization.
You might outsource part or all your Human Resources management. Someone else is posting jobs online, screening candidates and handling the on boarding process.
It is common to outsource payroll, as well. Then someone else is tracking HR metrics, issuing paychecks and managing payroll taxes.
Likewise, IT can be outsourced in part or in full. Let's say you're a Singapore small business. It makes no sense to hire a headcount to handle occasional IT problems. You can consider engaging a Singapore IT outsourcing company to help you instead.
How Can Outsourcing Help?
Outsourcing has several advantages.
A small business often saves money by outsourcing to a large, specialist firm. They only have to pay a set fee for the services used. And save cost without hiring full-time accountants that are under-utilized.
Another benefit is that you can tap into specialized knowledge you don't have in-house.
For example, you could ask questions of an employment law expert at the HR firm to save cost. And you don't have to keep an HR attorney on retainer. Good IT firms have dedicated IT security experts to monitor your systems. And they may have people on staff who can help you migrate to the cloud.
So you can add-on an existing contract. There isn't a need to find another expert and negotiate a new agreement.
What is Offshoring?
Offshoring is the term used when manufacturing or other work is moved off-shore.
For example, you might have sub-assemblies made in Mexico instead of the United States.
Off-shoring is not necessarily outsourcing.
For example, Microsoft set up massive offices in India first. Then they hire coders and tech support staff there.
These IT jobs were moved offshore, but they were not outsourced. If the company sets up a subsidiary in another country, this is offshoring too. They're simply move work to another part of the world.
How Can Offshoring Help?
The greatest point in favor of offshoring is that it generally results in lower labor costs. Offshoring may cut manufacturing costs significantly. Furthermore, you are likely to save money on skilled talent too.
You could find IT support staff or financial experts working for half what they do in your own country.
Call centers are a classic example. Outsourcing to offshore call centers could result in 24x7 support for your customers. It gives you the added advantage to better serve international markets.
How Do You Determine What Is Right for Your Business?
Outsourcing can be done in domestic or international firms. It isn't easy to save many costs by outsourcing within your country. But, you may not be able to find the same expertise abroad in some cases.
For example, it is easy to find skilled Windows server support staff around the world. Your mirrored website and backup data could be hosted on foreign servers, as well. Yet it may be hard to find an Indian accountant familiar with your jurisdiction's tax laws.
Choose the functions you would like to outsource.
Then determine whether it is feasible to outsource them to offshore firms.
Did I Miss Out Anything?
Now I’d like to turn it over to you:
What’s the area of your business that you want to outsource or offshoring?
Is it going to be HR? Or digital marketing?
Or maybe you have a question about something you read.
Either way, let me know by leaving a comment below right now.