Bussiness runners usually find it hard to figure out the difference between outsourcing vs offshoring. In this article, BSS Commerce will help you to dig into major differences, thereby picking the most suitable one for your business model.
As you know, the COVID-19 pandemic spread throughout the world has led to considerable changes in business operations and processes. Only firms equipped with technology can survive and stand strong. Therefore, an increasing number of businesses are now tailoring high-tech solutions. This situation does beg the question of how companies can both handle high-tech operations and run crucial ones. In fact, many companies have obtained their business goals by seeking reliable offshore and outsource partners to win their games.
Most companies choose between offshore vs outsource tasks like customer service, payroll, IT-related works, software development, data entry, virtual assistance, data research, and even digital marketing. Offshore and outsource technology solutions move in tandem with a big reduction in cost, access to a pool of skilled workers. However, the risks concerning data security, brand reputation, and management exist but do not emerge as a big deal. In particular, there is a wide range of solutions to avoid these pitfalls. In addition, offshore and outsource technology solutions are considered the most effective business tactics.
The two terms offshore and outsource are buzzwords in the business world. However, these terms are some of the most confusing terms to business owners. People find it difficult to differentiate between offshore vs outsource. In this article, we’re going to figure out the difference between outsourcing and offshoring and the introduction to both terms. We’re also going to differ outsourcing vs offshoring technology solutions and discuss the advantages and disadvantages of both types. Continue reading to learn more.
What is the difference between outsourcing and offshoring?
Table of Contents
What is offshoring?
Offshoring is a technology solution – that refers to the practice of companies hiring offshore developers. They live in another country to handle certain operations other than their primary ones. Offshore technology solution implies something far away from the holding company located in your own country. The team located in another country functions as a subsidiary or a branch of the main company.
We also have the onshore technology solution, which means sending certain business processes to another location but in the same country. In addition, nearshore has a close meaning to offshore. Nearshore also refers to moving your business operations to somewhere else instead of doing it locally. However, there are solely minor differences in time zones, culture, workplace environment, people, living standards, and governmental policies.
With the offshore technology solution, your company can leverage cost differences to save money. The offshore service provider is often placed in countries that have much lower costs of living compared to the host country. Therefore, moving certain business processes to such countries appears to be highly productive and cost-effective.
What is outsourcing?
Outsource technology solution describes an act of assigning certain business activities to a third-party company. While the main criterion of offshoring is whether the provider settles in another country or not, the main criterion of outsourcing is whether they cater to the same business or not. In other words, outsourcing includes both domestic and foreign contracts. If your company sets up a branch in a foreign country, it means offshoring without outsourcing. In contrast, if your company hires a company in your own country to complete some business processes, it means outsourcing without offshoring.
The outsourcing service provider may help you develop an app, set up a website, implement extensions, design an interface. As a result, the headquarter company can save time to focus on primary parts of the business thanks to this technology solution. Moreover, while offshore development causes communication obstacles due to geographical barriers, time gaps may barely exist with outsourcing. The right outsourcing partner can also have your company access to an enormous talent pool, a reduction of costs and required time, high-quality products and services.
How are outsourcing and offshoring different- What are the key?
Here are key differences between outsourcing vs offshoring.
Definition
Outsourcing refers to the shifting of the business functions or activities to other companies that have the expertise in that field except for core ones.
Offshoring refers to moving certain business operations or functions to any remote country, where the living standard is cheaper compared to its home country.
Implication
Outsourcing implies assigning business operations to a third-party company.
Offshoring implies moving both offices and operations to another country instead of doing it locally.
Location
Outsourcing can be carried out domestically or abroad.
It is compulsory to settle the business far away from the host country.
Objectives
The main objective of the outsourcing technology solution is to get the time, infrastructure, and human resources so that your business can take priority over the firm’s core business activities.
The main objective of the offshore technology solution is to cut down costs. The holding company can make full use of the cost disparity to cut costs in facilities, materials, and labor to save money. Besides, the holding company doesn’t have to start everything from scratch thanks to the offshore provider’s infrastructure.
Activities performed by
Outsourcing will be performed by non-employees that the third party’s employees to whom it has been outsourced.
Offshoring will be managed by employees of the organization or the business entity.
Advantages and disadvantages of the offshore technology solution
Advantages
Cost reduction
The offshore development team often settles in countries that have lower living standards compared to the one in which the host company is located. Companies can take advantage of the cost difference to cut down on required and save money for other purposes. Moreover, it can stimulate productivity, business output and promote expansion in another market.
The holding company can save an amount of money on IT infrastructure and facilities thanks to the ones of the offshore development center provider. The holding company is not alone but gets support from the offshore partner.
Increase in productivity
The offshore development center will help manage a part of your business operations well and promote your business process. Customers always want the products and services to be carried out as soon as possible. It is a good idea for companies to adopt offshore technology solutions to the design, development, and testing of their products.
When your company decides to hire offshore developers, it can speed up recruitment and human resources management processes.
Exposure to skilled experts
The host company can get access to an enormous talent pool at competitive prices. They have high-quality expertise in certain fields for your requirements. The dedicated offshore center respects the flexibility and strict adherence to the project timeline.
Expansion into foreign markets
Moving some business operations to another country makes it easier to get access to new customers and get to know them. Companies can make use of the offshore center provider‘s brand image to build their local reputation and develop their business in the local market. Consequently, they can maximize the bottom line.
If you want to read more about how an offshore development center can have a positive effect on your business, please click here to know more: https://bsscommerce.com/blog/offshore-development-center-speed-up-business-growth/
Disadvantages
Time zones differences
Time zones can have a big effect on running the business. The offshore development center may work at hours nearly opposite to that of the holding company. Therefore, it is hard to discuss business issues. Offshore technology solutions require time management skills.
Cultural Barriers
Your offshore team may speak another language and have a different working culture, which leads to difficulties in team cooperation. These problems need to be solved to ensure the highest productivity.
Communication issues
Direct cooperation among members with related departments can make it easier to gain an agreement and consistent process. This can speed up business operation and product development.
Technology may make online communication easier but physical interaction is much more effective. Companies need to find new technology solutions to manage team collaboration well and eliminate geographical barriers.
Security risks
Data leakage is a potential pitfall to take into consideration. If you have to share your confidential information with an offshore partner from another country, you will face much higher risks. In some businesses, confidential information is the backbone of their brand. A business secret makes them different from other competitors and stand out. That’s why companies need to look out for solutions to ensure data protection.
Advantages and disadvantages of the outsource technology solution
Would you still take full control of the business when you outsource? Yes! Can it still serve your customers with high quality?
Advantages
Get access to cheaper certified and skillful labor.
Like offshore technology solutions, outsource development involves working with labor from the outsource providers. Certain business processes will be transferred to vendors who have years of experience and high-end skills.
Your team may be excellent in some processes but not all. The outsource technology solution provider has a team with specialized equipment and technical expertise. They can not only meet but exceed your requirements with better quality and output. Moreover, these skilled outsourcers constantly keep updated with the latest trends and changes.
Reduce cost and save time.
“Time is gold”. More time means more business money. Your core team needs to dedicate themselves to chief tasks, thereby making more money. It is a fact that they can not do that while handling too many duties at the same time. Imagine that you have to struggle with financial issues, customer service, and human resources management. Time is wasted uselessly when your core team works on projects outside of your skillset.
Companies can choose to delegate peripheral duties to outside companies to lighten the burden of your core team. The host company does not need to spend money and resources to build an in-house team.
What’s more, companies don’t have to care about processes but results. They can concentrate on developing their talents for speeding up essential processes by passing on some non-core processes. In short, outsourcing the supporting processes gives the organization more time to strengthen its core business process. Your company will have more resources to focus on key activities or functions by sending the rest parts to a third-party company.
Share risk responsibility with a company with good expertise and get consulting advice from experts with years of experience.
Risk estimation and analysis are some of the most critical aspects of any project. And outsourcing can help you minimize potential risks. You will make a considerable amount of profit by outsourcing certain campaigns or processes to experts in their industry.
Thanks to the advantages of outsourcing, your firm will become more consistent in all stages of business. Because the outsourced vendor is a specialist, your operations would run smoothly and get adjusted by them when necessary. They also find new methods to reduce risks and maximize profit. You could count on work being accomplished and expenditures remaining constant.
Speed up recruitment and information technology operations.
Outsourcing eludes the need to hire individuals in-house; thus recruitment and operational prices can be reduced to a great extent. This is one of the remarkable advantages of outsourcing. Outsourcing can help lighten the burden of the core team. Therefore, they can concentrate more on important tasks.
Get faster and better products and services
Improve your service offerings by offering high-quality deliverables and reducing the time required for your products and service to reach the target market. As a result, you’ll be able to convert your ideas into products faster and add value more effectively. In business, you can provide products and services in less time but with higher quality, this means you win the game.
Disadvantages
Management difficulties
It is harder to monitor and take full control of operations and activities when you send them out to outside agencies or freelancers. When it comes to outsourcing, some potential problems including stretched delivery time, unqualified quality output, and inappropriate categorization of responsibilities can come up. It is easier to tackle these factors inside an organization rather than with an outsourced partner. However, that shouldn’t be a problem as long as you choose the right partner for outsourcing. Remember that you need to proceed with caution.
Communication problems
Although technology has partly eliminated communication barriers. However, dealing with international freelancers or a local expert will lead to some annoying issues. Assigning or
guiding distant work by email or phone will not be as effective as face-to-face interaction. Outsourcing could take you a lot of time, money, and aggravation.
Security risks
Data protection now attracts a lot of attention from clients, they always stay alert about their personal information. Therefore, you must treat client data with caution. When your company plans to outsource HR, Payroll, and Recruitment services, it involves a risk of giving others a chance to intrude on client data. If you plan to outsource processes related to personal data, you may pose a threat to the privacy of customers. You need to ensure your company’s security when disclosing such information to others. So, watch out!
Lack of customer orientation
The outsource technology solution provider may only complete their work to receive a salary. Customer satisfaction is not their goal. They just accomplish it without care instead of dedicating themselves to the process. In such situations, vendors may lack extensive focus on your company’s tasks.
Thus, every coin has two sides and outsourcing is not an exception. However, the previous list has proved that there are much more advantages of outsourcing than its disadvantages. Businesses should always consider outsourcing to lighten their workload.
Offshore vs outsource – which one suits you best?
To offshore or to outsource has its advantages and disadvantages. However, these two technology solutions both aim to increase the output yield and productivity of your company by enhancing resources. In fact, some companies choose to hire both offshore and outsource developers. They have outsource developers work while their offshore team falls asleep due to different time zones. If you want to choose one between outsourcing vs offshoring, we will show you how.
When should you choose to outsource technology solutions?
Outsourcing refers to the completion of operations in some business areas that involve services provided by non-company-owned service providers.
Outsourcing tends to fit short-term services that a company might need. Because in that situation, your company only needs extra resources to meet the requirements of your client for a short amount of time. Thus, it is wiser to outsource the operation to other companies.
A third-party service provider has their specialized skills in the production or process that your company will source out from them.
When should you choose an offshore technology solution?
Meanwhile, offshoring is mainly an expansion of the business operations and the office of a company to another country. The main criterion of this type of business model is that there is no third-party service provider involved.
If the business part you want to outsource for an outside partner relates to client data, especially important personal data, it can bring back many potential risks. You will not want to share confidential information and requirements with a third-party company. This means that outsourcing is not trustworthy and outsourcing asks for additional monitoring expenses.
In contrast, with offshoring, you can take full control of all of your company’s operations and activities regardless of where your offshore development team is located. It doesn’t take any effort to manage the business activities that happen throughout the entirety of your operations. Your offshore team is within the company so you two share benefits and conflict of interest, of course, vanish.
Another advantage of offshoring is cost reduction. What this means is that companies often choose developing countries, such as India, the Philippines, or Vietnam to offshore business operations. The host company can leverage cost disparity to buy cheaper raw materials from their facilities abroad.
If you want to find out Why Vietnam is a promising land to hire offshore developers, you can read this blog: https://bsscommerce.com/blog/hire-offshore-developers-in-vietnam/
However, the time required for training is a crucial problem when a company is involved in offshoring. Your company needs to consider cultural barriers, communication obstacles, and time zone differences because these are detrimental to the company. Time is required to train offshore employees, which comes with a deceleration of productivity for a certain amount of time. You must invest more time when engaging in offshore development.
In short, offshoring can yield much profit for long-term services while outsourcing performs well for short-term services. This business model is designed to handle the operations of a company that runs repetitive client services for a longer time. Short-term or long-term requirements need to be taken into account so that you can determine which one is the right business strategy to adopt.
Moreover, here are the Top 12 offshore development teams in Vietnam for you to pick up a suitable company for your business.
BSS Commerce – a lead offshore development center
Now, if you’re a business owner and still haven’t tried outsourcing yet, what’s stopping you? Looking for a gainful way to handle your business process? We suggest you try offshore outsourcing or hire a virtual assistant instead. Hire an offshore development center is a practical technology solution for all companies of any size.
Nevertheless, companies may have difficulties in setting up your offshore development center due to work habits, language barriers, as well as your adherence to the local constitution and laws.
However, if you hire the right offshore development center, these potential pitfalls will vanish. Thanks to our diverse set of expertise and years of experience, BSS Commerce can help your company to not only take on certain business processes and operations. We provide a wide range of offshore development services that can surpass your expectations.
Besides, our young and high-quality offshore experts have English proficiency and adopt a modern mindset. BSS Commerce’s offshore development center provides excellent services and products ranging from apps to extensions with instant support.
Up to now, BSS Commerce has obtained over 500 successful projects for worldwide clients. Therefore, we are confident to be your ideal offshore development partner.
CONTACT NOW to let us know your problems. We are willing to support you every time.
