When you are running a new business, it can get pretty confusing. Some processes can use streamlining. And some operations can be on the nose. To improve your productivity and streamline your business processes, two ways can help. These are outsourcing and offshoring.
So what is the difference and similarity between outsourcing and offshoring? In a nutshell, outsourcing pertains to having certain tasks contracted to a third-party company. On the other hand, offshoring refers to building your global team in another country.
What Is Outsourcing?
Outsourcing occurs when a company negotiates a contract with a third party to perform a specific function; it is also referred to as the act and process of having certain tasks contracted to a third-party company. One company that provides outsourcing is FilePino.
The Pros Of Outsourcing
The benefits of outsourcing are:
● Increases the efficiency of your business. When you outsource, you give another company a task that takes a long time for your in-house team to complete. The company finishes your tasks in a shorter time and gives your team a breather.
● Allows your company to focus on its strengths. Your team can focus on doing tasks they specialize in.
● Saves more money. Outsourcing saves money by having a separate company perform the tasks for a lower price.
● Better availability of skilled workers. Outsourcing makes finding skilled workers in certain work processes and tasks easier.
Cons of Outsourcing
The risks, criticisms, and cons of outsourcing include the following:
● Transferring jobs to other countries. Due to the lower labor costs of outsourcing, a criticism of outsourcing is that it can be seen as “exploitative.”
● Geopolitical risk. Having your business processes outsourced leaves your business open to geopolitical risks in the countries where you have your processes outsourced.
● Language differences. Due to your work being outsourced to a different country, you will face some communication barriers. One is the language difference, as the English they use may differ from the one you use.
● Poor communication. Communication is another crucial con with the decision to outsource your business processes. Cultural differences can be a barrier when it comes to communication.
What Is Offshoring?
Offshoring occurs when you allow your production operations to be performed in another country. Other words to describe offshoring are “contracting work out to an external organization.”
Pros Of Offshoring
● Lower hourly rates. In other countries, the hourly work rates are less costly than those in first-world countries.
● More employment opportunities. For skilled workers, offshoring is a great way to gain opportunities and better work options.
● Control over production processes. In offshore production, you get to have total control over the production process as well as over the operations of your company.
● Fosters new demands. In offshore production, plenty of opportunities for businesses open by creating new demands, such as high-tech items.
Cons Of Offshoring:
The cons of offshoring are:
● Communication barriers. Cultural differences can become communication barriers when your business processes are in a different country. As a result, your projects can get delayed.
● Lack of control over outcomes. With offshoring, you also consider some factors you cannot control. As a result, you lack control over the outcome of the project.
● Changes in national economic policies. Your business operating in another country can expose you to following the necessary operational requirements. If the laws regarding the national economy change, it can be troublesome to have those processed.
In a nutshell, outsourcing and offshoring involve having business processes performed outside the country. The variables involved, however, differ between outsourcing and offshoring.
Angelo Castelda works as a contributor for a news magazine in Asia. He loves to learn and understand diverse cultures and aims to share through his writing his experiences around the world.