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Is there a difference between "outsourcing" and "offshoring?"
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Answers
Generally, the tasks assigned to the contractors can be divided into outsourcing and outstaffing. Outsourcing is mostly project-based activity. The outsourcing company will forward your project to a team of developers. The team can simultaneously work on several projects for different companies. Outstaffing is about hiring full-time team, dedicated to your project. The developers are hired for you only.
At the same time these models can be divided into offshoring, nearshoring or sometimes onshoring. In the case of offshoring, you build teams in faraway lands, whereas with nearshoring you can have them in a neighboring country. Onshoring is about hiring some contractor in the same country.
This is the nice pic from beetroot.se
@Jul nice map. Thanks for great explanation.
Outsourcing refers to an organization contracting work out to a 3rd party, while offshoring refers to getting work done in a different country, usually to leverage cost advantages. The biggest difference is that while outsourcing can be (and often is) offshored, offshoring may not always involved outsourcing.
Yes,
-Advantage in Costs
Outsourcing invariably provides the advantage of lesser costs. There are no hassles of dealing with permanent employees, paying for their annual leaves, maternity leaves, bothering about compliances and labor laws. Outsourcing is more prevalent in the stream of customer handling and that is why the BPOs and KPOs are in demand. They save a lot of money to the company outsourcing the processes.
Offshoring too provides advantages in lower costs. Shifting operations/manufacturing to another country where labor costs, cost of raw materials, lesser compliances and other benefits provided by the local government are available, would drastically reduce the cost of finished products.
-Improvement in Quality
Outsourcing – There are processes or manufactured items that may present a high cost to a company if they were to set up the same on their own. It would be prudent to outsource production of the component to a manufacturing unit which specializes in the manufacturing of the component(s). The automobile industry does it all the time. For example, a car manufacturer does not manufacture all the components of a car and procures them from vendors who are outsourced to manufacture the required components to the car company’s specifications. So, the components cost much less to procure than to manufacture.
Offshoring – While selecting a country to which a part of the operation is to be offshored, the skillset available locally, ease of operation, availability of infrastructure, and other such factors are taken into consideration. As an example, an IT company in hardware manufacturing business may decide to offshore its operation of manufacturing chipsets or other hardware components to another country and benefit from advantages of skilled workforce, lesser legal compliances, etc. as well be closer to the larger market. Similarly, a software development company may decide to shift to a country like India, where highly skilled software engineers are available at a much lower salary compared to – say the U.S.
-Labor and other Skilled Manpower
Outsourcing – When a company outsources some functions that are not the core activity, the labor or even skilled manpower requirements may vary according to season or demand. Hiring and firing is not easy. Outsourcing reduces these hassles as a company may pay only for the time or term during which outsourcing is required.
Offshoring – It is carried out after extensive studies taking all variables into consideration. An offshore project is a long term business setup. Of course, the offshore business setup may opt for some of its functions to be outsourced. Yes, this definitely is possible and is in practice too.
I believe out sourcing is you are buying or souring products or services from other company or individually who is not an employee of you and offshore is building your company roots in some other country
Outsourcing is service offered within the country or location and offshoring is overseas or foreign country.
Outsourcing and offshoring are two terms that are often used interchangeably, but there is a distinction. "Outsourcing" typically refers to the process of taking a job or task out of the company that is performing it and handing it off to a third-party. This is often done in order to reduce costs or to increase efficiency. "Offshoring" is when a company moves jobs or production overseas in order to take advantage of lower wages and fewer labor regulations.
So, the answer to our question is that there is a difference, but it is important to understand the specifics before making any decisions.
Outsourcing is the practice of contracting with an outside firm to carry out specific duties or operations that were previously performed by internal staff. On the other hand, offshoring is a particular kind of outsourcing that entails moving some or all of a company's activities to a foreign nation.