Offshoring & outsourcing have been a business practice in corporate America for decades – and these days, even smaller businesses are seeing the value. But what are outsourcing or offshoring – and what’s the difference between them? Let’s examine both of these terms & define the differences to help you understand what’s best for your business.
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Outsourcing entails delegating internal operations to a third party. This could mean obtaining a supplier, buying back goods or services, or shifting an entire department or division of your business to a third-party. The underlying philosophy being: To move transactional activities to the experts in order to give an organization the capacity to focus on its expertise.
By spinning off non-essential operations, the company can direct its focus on its core competencies. This business model claims to reduce labor and production cost, expedite transactions, improve service efficiency, and maximize the use of external resources.
Outsourcing has been practiced since 1989 and became more prevalent in the ’90s. To this day, outsourcing is practiced by most large corporations and has been evenly spreading throughout smaller businesses. Plunkett Research states that in 2018, it has blossomed into a $587- Billion global industry.
A few notable companies that leverage outsourcing are Apple, IBM, and even Walmart, to name a few.
One disadvantage of outsourcing is the need to share critical and proprietary information about your business. This is why companies like MyOutDesk have extremely stringent protocols in place to protect clients, especially in an information industry like Real Estate.
Unlike outsourcing, offshoring is primarily a geographic activity. In the West, goods are expensive because the staff required to produce and distribute them are costly. In the developing world, by contrast, vast inexpensive labor pools provide a secure bedrock for a low-cost economy. Offshoring moves a business process of a company to a foreign location, but unlike outsourcing, offshoring lets you retain control of the business process.
Offshoring has been a practice since the 1960’s when US semiconductor industries began to offshore labor-intensive manufacturing works. Nowadays, offshoring is most commonly used in the IT industry because there is an increasing shortage of developers in the US. For decades, IT professionals have been one of the hardest-to-fill positions, making it difficult for large corporations to keep up with client demands. Therefore, most tech companies prefer to offshore their teams. Companies such as Microsoft, Ford, and American Express utilize offshoring.
Offshoring does not only relate to the production of physical goods but also services. The Indian IT industry, for instance, has been powered by waves of offshoring by technological companies in the West.
Which is better?
In the end, it’s all about finding the right balance between distributing critical and non-critical parts of your operations. Offshoring is an ideal option if you want to enhance your operations while retaining full control of the process. Although it has its fair share of challenges, it is far safer than handing over important information about your business and entrusting service fulfillment to outsiders.
MyOutDesk’s Virtual Assistants are more than on outsourced or offshore worker. We find the perfect match for you and your business from our pool of talent. Their purpose is to be a member of your team and provide you with the leverage to focus on your revenue-generating activities that will help grow your business. Don’t forget to schedule your Double My Business Strategy Session.