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Offshoring Versus Outsourcing Which Is Best For Business?

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Businesses need to be competitive to make a profit so they’re always seeking solutions that reduce their overheads. Offshoring core activities is one way to reduce overheads, keep control of a business’s intellectual property and keep their data secure.

In this blog article, we look at offshoring and outsourcing and we consider if there is a right and wrong time for a business to consider either option.

Offshoring Explained

There are countries that are considered the back office of major corporations located somewhere else.  China, Vietnam, India are some of the nations that provide goods production and professional services for businesses located in western countries like USA, Canada, UK, and Australia. These countries are used for offshoring and outsourcing.

Is Outsourcing Another Name For Offshoring?

The short answer is no, outsourcing is quite different in its workings to offshoring.  With outsourcing, your business has essentially signed a contract with a service provider to deliver the services on behalf of your business.

The similarity between the two services is the business or team providing the manufacturing or professional service is usually located out of state or in another country to that of the business.

Where in the business is full outsourcing is popular?

Server and Website Hosting is an area we’re all familiar with and most businesses outsource this service.  The other areas deemed more sensitive and systems critical to a business also often outsourced are:

  • Technology hardware & software
  • Data communications
  • Software development
  • Bookkeeping
  • Payroll services
  • Administration

Why Offshoring?

There is more control over the process with offshoring as the business can dictate the terms and use its own rules and systems.

The starting point is to choose where you want your business process to be carried out, i.e. in which country and area.

Setting up a team or purchasing a business in another country to roll out the service is not as challenging as it might appear as countries like those aforementioned are used to the activity.

The offshore team will work exclusively for the one business and therefore adhere to their methodology.

An example of where this activity is prevalent today is in the professional services sector.  Law firms and accounting practices readily place services offshore to reduce staff costs. An Accounting firm will locate part of its practice in a country and hire qualified workers i.e. accountants who cost less than their peer in the area or country the Accounting firm is located.

Is there a right or wrong time to consider outsourcing or offshoring?

Timing Is Everything

Yes, as timing is everything especially with everyone connected online in social media.

The reputation of a business can be damaged if clients start complaining of a negative change in the service.  Therefore a business needs to do a thorough analysis and weigh up the pros and cons of moving core processes or systems offshore or into the hands of another business entirely as is the way with outsourcing.

Managing the move will be challenging as people don’t like change especially if it costs them time.   Just think of how annoying it is to visit a website or use the App you use regularly only to find its user interface in a new design and it’s functionality changed.

Learning takes time and requires patience so it’s important for all businesses moving to an offshoring or outsourcing model mark sure their staff and end users are managed during the transition and that their experience is satisfactory with knowledge of much better service on its way.

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