Outsourcing vs Offshoring
Outsourcing
Hiring a 3rd party and their employees, often in another country, to perform a task or service.
Offshoring
Hiring internal employees in a foreign country.
These solutions are commonly confused
Outsourcing, often referred to as Business Process Outsourcing (BPO) is a solution for companies who will engage a 3rd party to hire, train and manage their own offshore staff. Offshoring offers the following benefits:
- Lower time-investment: you don’t need to hire/manage staff
- Scalable: BPO’s often have a large workforce readily available
- Resources: BPOs will often bring their own technology and processes that may be more efficient than your own
Offshoring refers to the process of hiring international staff, and owning responsibility for training and management yourself. Some advantages include:
- Control: by owning all aspects of the process, you’re more directly able to influence results
- Integration: your offshore staff will be an essential part of your team, rather than a vendor. Integrated teams tend to perform better.
- Cost: you’ll save money by cutting-out the 3rd party vendor
Key distinctions to consider
Outsourcing
Offshoring
Agency
You
Agency
You
Employs staff
Controls quality of work
Impacted by outcomes
How to know when to outsource, offshore, Nearshore or onshore?
Here's a simple model:
Outsource
Simple, repetitive work such as Data Mining.
Offshore
Research that requires knowledge & critical thinking like Prospecting
Nearshore
Entry-level sales & appointment-setting roles where a connection to US culture impacts outcomes
Onshore
Crucial roles that require either A. In-person presence i.e. Client Relationship or Employee Management, or B. Deep immersion in US customs like Sales roles that interface with executives.