Outsourcing vs Offshoring: What’s the Difference? Exploring Advantages and Drawbacks

In the world of IT, offshoring and outsourcing are two buzzwords that are often misunderstood or confused. While there’s some overlap between the two, they are distinct business strategies, with their own set of advantages and drawbacks. Without further ado, let’s lift off the fog of confusion.

• We will tell you what is the goal of Outsourcing and Offshoring.
• We will also introduce the main Outsourcing benefits…
• …and the drawbacks of Outsourcing.
• What really Offshoring is?
• We will show the main advantages of offshoring.
• The drawbacks of Offshoring.
• Outsourcing and Offshoring are two effective business strategies, but which one is better?

The goal of Outsourcing and Offshoring

Both outsourcing and offshoring aim to improve operations. Multinational corporations and SMBs alike seek to employ either strategy or a combination of the two, to gain competitive advantage. The main drivers behind each approach are to:

• Increase productivity
• Reduce costs
• Obtain more qualified specialists
• Access advanced technological solutions

Depending on the business needs and type of operations, there are different recommendations for these two business strategies.

What Is Outsourcing?

Outsourcing means delegating a portion of business operations or a process to a third-party. Most outsourced processes revolve around non-essential, peripheral activities. While it’s often associated with commissioning work to an overseas partner, the location of the outsourcing company can be the same as the company looking to hire.

According to Statista, in 2018, the global outsourcing market reached $85.6 billion.

Accounting and IT services are the two most outsourced business operations at small businesses, as reported by Clutch.

Benefits of Outsourcing

Outsourcing is a tested strategy to improve operations. Big companies and small businesses turn to outsource to reap the benefits of this approach. A 2016 Deloitte survey found the main reasons why companies outsource:

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