Outsourcing and Offshoring: Is There Really a Difference?

Outsourcing occurs when a company contracts a specific process out to a third party, finding someone who specializes in whatever needs to be ... Sections Sections TopStories Video Live U.S. Politics Coronavirus Jan.6Riot International Entertainment Business Technology Lifestyle Health VirtualReality Weather Tips Sports FiveThirtyEight Shows Shows GoodMorningAmerica WorldNewsTonight Nightline 20/20 ThisWeek TheView WhatWouldYouDo? More PrivacyPolicy YourCAPrivacyRights Children'sOnlinePrivacyPolicy Interest-BasedAds TermsofUse DoNotSellMyInfo ContactUs Search OutsourcingandOffshoring:IsThereReallyaDifference? ByKyleBlaine June25,2012 Ifyou'regoingtoattackMittRomney,makesuretodefineyourtermscorrectly. RomneycameunderattackafteraWashingtonPoststorypaintedhimasan"outsourcingpioneer,"buthistopcampaignadvisersarepushingbackagainstthoseattacks,accusingthemediaandtheDemocratsofconflatingoutsourcingwithoffshoring. Politicsaside,Romney'sadvisersmayhaveapoint.Thetwotermscanhavedifferentmeanings,andoften"outsourcing"isusedmistakenlyintheplaceof"offshoring." Outsourcingoccurswhenacompanycontractsaspecificprocessouttoathirdparty,findingsomeonewhospecializesinwhateverneedstobedone.Offshoringhappenswhenbusinessessendin-housejobsoverseas.Bothmaysaveacompanymoney,butonlyoffshoringspecificallymeanssendingjobsoutofthecountry. On"FaceTheNation"Sunday,RomneycampaignsenioradviserEricFehrnstromexplainedthedifference. "OutsourcingiswhattheObamacampaigndoeswhentheyhireanoutsidetelemarketingvendortoprovidetelemarketingservice.Thisisdonebycompanieseveryday.Theytakefunctionsandtheyallowvendorstodoitinsteadofhandlingitin-house.OffshoringistheshipmentofAmericanjobsoverseas,"hesaid. However,accordingtoRogerNoll,ProfessorEmeritusofEconomicsatStanford,outsourcingandoff-shoringcanoccursimultaneously. "IsuspectsomeofwhatRomneydidwasacombinationofoutsourcingandoff-shoring,"Nollsaid."Yetallthistalkaboutoutsourcingandoff-shoringdistractsfromwhatmatters,whichis,wasitthecasethatbadcompaniesweremadehealthyorwasitthecasethatgoodcompaniesweremadesick?" ThequestionnowiswhethertheRomneycampaign'sattemptatplayingEnglishprofessorwilldeflectthisnewlineofattack. PresidentObamacertainlydoesn'tthinkso.AtacampaigneventinNewHampshireonMonday,ObamacriticizedtheRomneycampaignforitsattemptstoclarifytheissue. "Now,whatGovernorRomneyandhisadvisersdon'tseemtounderstandisthis:Ifyou'reaworkerwhosejobwentoverseas,youdon'tneedsomebodytryingtoexplaintoyouthedifferencebetweenoutsourcingandoffshoring,"Obamasaid."Youneedsomebodywho'sgoingtowakeupeverysingledayandfightforAmericanjobsandinvestmenthereintheUnitedStates.That'swhatyouneed.That'swhyI'mrunning."