Outsourcing vs. Offshoring. Outsourcing and Offshoring are both popular business strategies and are often viewed as the same thing, however, there is a thin line difference between the two. In fact, each of them represents distinct approaches to delegating business functions to external providers and can be the most effective way to reduce costs, increase efficiency, and access specialized expertise.
In today’s article, we will explore the relevant differences between these two and help you determine which of these business strategies is the best fit for your staffing needs.
Outsourcing vs. Offshoring: The Basics
According to Investopedia, Outsourcing is the business practice of hiring a party outside a company to perform services or create goods that were traditionally performed in-house by the company’s own employees and staff. In other words, it is a form of contracting with external providers to handle specific tasks or services, typically done to improve efficiency and cost savings.
Offshoring, on the other hand, refers to businesses relocating certain business functions or operations to another country, usually done to lower the operating costs, have access to a wider pool of talents, and also for other strategic reasons. Another thing that differentiates offshoring from outsourcing, is its ability to allow one’s company to actually establish a subsidiary in a foreign country or be partnered by other existing companies that can provide the necessary support and services for their business needs.
A good example that demonstrates these are as follows;
- Outsourcing: When a company decides to outsource its accounting functions to a specialized accounting firm. Doing so, allows the business owner to access high-quality financial services without having the need to hire a full-time accountant.
- Offshoring: When a company moves some of its operations from for example the United States to the Philippines, where labor costs are relatively lower.
Outsourcing vs. Offshoring: The Benefits
When it comes to benefits, both can actually provide significant benefits for one’s business, be it staying with the yearly budget plan, increasing effectiveness and efficiency, and access to specialized expertise that is not available in the local market.
- Cost saving: One of the benefits of the two business strategies is cost saving. For outsourcing, if you, for example, decided to outsource some of your business functions, you can reduce both your operating and labor costs, as you are not responsible for providing the infrastructure, equipment and other staff necessary since the staff who will be working in your outsourced function is not yours officially, rather the third-party provider’s staff. On to offshoring, you are actually hiring full-time staff in a country that has lower labor costs to work solely for your business. The primary focus of this business strategy is to reduce labor costs and potentially lower operating costs.
- Access to Talent: Every business puts great emphasis on finding the right staff for their business, as they are a crucial part of the organization. Not only because they are the driving force behind the day-to-day business operation, but also one of the most important assets that a business must have in order to gain a competitive advantage over its competitors. Outsourcing and offshoring both allow you to tap into a wider pool of talents not limited to your home country and with that, the potential for you to find and have the right workers with specialized skills and experience is much higher compared to just local hiring.
- Increased Efficiency: Delegating some of your business functions whether through outsourcing or offshoring, can help you to have more time to focus on your business’s core competencies. You can free up your resources and focus on planning how you can achieve your set business goals.
Guerilla Staffing Solutions is an innovative solution for your staffing needs.
At Guerilla, we understand your business needs and curate solutions to help you streamline your operations and increase efficiency. We have a talented staff that is experienced in several industries and a wider pool of talents you can select if you decide to add more people to your team. Be rest assured that your full-time offshore staff will be working with you every business day onsite from our 1,000m2 facility. We provide managed operations recruitment, human resources, payroll, labor compliance, staff retention, performance management, facilities, technology, fast internet and IT support so you don’t have to worry about unnecessary stuff.
Best of all, clients who work with Guerilla Staffing Solutions can save anywhere from 50% – 70% on their labor costs.
