Offshoring vs Outsourcing - INVID

Outsourcing is the act of transferring business activities to an external organization that has a level of specializations. Offshoring, on the other hand, ... Skiptocontent 7minreadOffshoringvsOutsourcing OffshoringvsOutsourcingBY:ALBERTOLUGOMoreoftenthannot,offshoringandoutsourcingoccursimultaneouslyandareusedinterchangeably.However,thisshouldnotbethecasebecausetheyaretwodifferenttermswiththeirownmeaningsandfunctions.Theconfusionbetween“offshoring”and“outsourcing”isoneofthemostcommonlymisunderstoodaspectsoftheglobalsupplychain.Sowhatexactlyarethesetwoterms? Offshoring Offshoringisageographicalbusinessactivitythatbusinessesandcorporationsusetoobtainservicesandproductsinternationallyoroverseas.Whenacompanyoffshores,itshiftsthelocationofaserviceorproductionofaparttoalocationabroad. ReasonsWhyBusinessesOffshore: Costs-Byoffshoring,companiescanproducegoodsoracquireservicesatmuchlowerpricesandratesthanlocally. TaxandTariffs-Theregimesindifferentcountriesoffercertaintaxandtariffrelief.Forinstance,manycountriestypicallyallowcompaniestoimportgoodsatlowprices,enablingthemtogenerategreatsavings. Control-Asopposedtorelinquishingcontrolofpartoftheirproductiontolocalsuppliers,companiesprefertogetoffshorefullcontrolandresponsibilityfortheirentireproductionprocess. Outsourcing Defined,outsourcingishiringanexternalpartytocarryoutservices,performtasks,andhandleacompany’soperations.Thisisseenwhencompaniescontractworksouttoexternalindividualsororganizations. ReasonsWhyBusinessesOffshore: Costs-Themerefactthatsomeproductsandservicesareusuallyofferedatlowerpriceswhilemaintainingthesamequalitylevelasifthejobwasdoneinternallyisoneofthekeyfactorsthatdrawbusinessestooutsourcing.Eveninscenarioswherethequalityoftheserviceorproductisnotthesame,thereisthefactthatitwillbemorepocket-friendly. Specialization–Somebusinessprocessesorproductsareveryspecialized,andoutsourcingtoanotherproviderenablescompaniestoaccesshigher-qualityresults. Flexibility–Whencompaniesoutsource,theyonlypayforexactlywhattheyneed.Therefore,outsourcingoffersthemtheflexibilitytoonlypayforwhattheyactuallyneedandwilluse. OutsourcingandOffshoring KeyDifferences: Outsourcingistheactoftransferringbusinessactivitiestoanexternalorganizationthathasalevelofspecializations.Offshoring,ontheotherhand,referstomovinganorganization’sbusinesstoanothercountry. Offshoringisonlycarriedoutinternationally,whereasoutsourcingcanbedonebothlocallyandinternationally. Itisimportanttonotethatoutsourcingcanbeapartofoffshoring.Whenacompanyoutsourcesinternationally,itcanbereferredtoasanactofoffshoring. Theobjectiveofoutsourcingbusinessactivitiesistofocusonthecoreactivitiesofthecompany.Ontheotherhand,offshoringisperformedtominimizecost. Althoughverysimilar,itisnowclearthatoffshoringandoutsourcingaretwodifferententitiesofanorganization’sbusinessoperations.Theybothservetheirownspecificobjectivesandofferdifferentvaluestoanorganization. RelatedPosts Whydocompaniesoutsourcesoftwaredevelopment WhenandHowItHelpswiththeSystemDevelopmentLifecycle HowOutsourcingaTeamcanSaveYouMoney BuildinganAppWhileNearshoreOutsourcing MachineLearningAlgorithms PuertoRico:PerfectforSoftwareDevelopment WanttoHelpPuertoRico?Hereare3WaysYouCan