What is the difference between offshoring and outsourcing?

1. Definition
2. Source of work delegation
3. Functions
4. Work quality
5. Scalability and time

In the world of IT or any business industry for that matter, outsourcing and offshoring are two terms that are often used synonymously. Outsourcing and offshoring are similar in the sense that an organization assigns its certain business activities from another location. Both practices are aimed to increase productivity, reduce costs, obtain qualified specialists, and increase profitability. Nonetheless, there are distinctions between them. In this article, we will define the difference between offshoring and outsourcing. Understanding these key differences will help you decide which service option will better meet your business goals.

Definition

Outsourcing has become an increasingly popular business strategy to reduce costs and to allocate more time to focus on core functions.By definition, outsourcing refers to the practice of hiring a third-party firm to perform specific processes that were typically done by an organization’s team. A great example would be hiring a web developer to meet your IT needs.On the other hand, offshoring refers to the practice of delegating business processes to be performed abroad to reap certain benefits such as favorable government regulations, reduced tax, or a larger talent pool. Other great advantages of offshoring are cost-efficiency and time zone differentials.At Atticus, we offer offshore IT staffing in the Philippines to help SaaS startups and cloud technology clients to scale affordably. We can provide cheaper services, without sacrificing work quality because labor costs in the Philippines are 60% to 70% lower than in western countries.Moreover, the Philippines is 16 hours ahead of California, 8 hours ahead of the UK, 7 hours ahead of Germany. Such extensive time zone differences can also be beneficial for international companies that need to provide uninterrupted services such as IT maintenance or dedicated customer service.

‍

Download the Salary Guide to compare average salaries of top NetSuite ERP professionals.

download salary guide

‍

Source of Work Delegation

With outsourcing, you will utilize the services of a third-party company. Therefore, the business activities you delegate will be completed by the specialized employees hired by the said contracted third-party company. These employees are not considered as a dedicated staff of your firm and they will receive task orders from the third-party company that hired them.On the other hand, offshoring lets you hire dedicated staff for your company from overseas. The offshore employee or offshore team you hire will function as an extension of your own company.At Atticus, you can directly manage offshore employees and oversee their tasks. Our employee lifecycle starts with obtaining applications that meet clients’ job requirements. Then, throughout onboarding and performance management, we define clear expectations by aligning clients and employees.

Functions

Outsourcing typically involves hiring a third-party company to perform specific business tasks within the operational chain. For example, you can hire a web administrator to maintain and troubleshoot your business' websites. This role may have repetitive tasks, which makes outsourcing an ideal option for companies that want to streamline operations.Alternatively, offshoring is commonly used to delegate more complex business processes to a dedicated team overseas. For example, you can offshore an Amazon Web Services (AWS) certified DevOps engineer, a NetSuite technical consultant, or a SalesForce support engineer.At Atticus, we have unceasingly formed communities within a wide array of technology verticals to attract the right offshore talent for clients. We also heavily invest in top IT graduates and budding tech leaders in the Philippines. Rest assured that your hired offshore team from Atticus will be composed of highly-trained specialists that can deal with your ever-evolving IT requirements.

Work Quality

With outsourcing, work quality may fluctuate because employees of the third-party company are not your company’s dedicated workers. They may have other client projects, which can affect your organization's production quality and timetables.While with offshore companies, the hired employees are considered as an extension of your team. They are trained not only to work on your delegated business tasks but also to uphold your organizational policies. This results in consistent quality output.Some offshoring companies also regularly evaluate staff performances to ensure they are at par with your service quality expectations.Atticus is an example of an IT offshoring company in the Philippines that keeps employees agile and evolving with the changing needs of your company through regular performance assessments and training. Our offshore teams have access to Atticus University to develop their competencies and meet clients’ work quality demands.

Scalability and Time

Outsourcing is a scalable business practice in the sense that it is helpful only for specialized tasks. It can be a great temporary solution for operational peaks that need extra staff throughout periodic times of the year.On the other hand, offshoring will allow your business to scale with a dedicated staff that reduces costs and increases productivity at the same time. You can start by offshoring an IT consulting team from Atticus. Then, as your company scales, you can expand to more complex offshore roles that require more effective manpower.

Key Takeaway

In this article, we discussed the difference between offshoring and outsourcing. Both business practices can help companies improve operations significantly through cost reduction, enhanced productivity, and more. Companies that want to either outsource or offshore their tasks must assess which one is better for their business model.Atticus is a reputable company for IT offshoring in the Philippines. Our expert-vetted technology professionals aim to fill your talent gaps and provide a flexible solution for your team. We are keen on adding value to your operations with cost-effective and scalable IT solutions. Get in touch with us by clicking here! We can recommend the best service options to meet your business needs.