Outsourcing and Offshoring are the two terms that people generally use interchangeably. But, they are not the same and describe different aspects.

Outsourcing Vs. Offshoring: The Evolution

Outsourcing:

The Industrial Revolution has completely changed the outlook of how businesses were operated. Highly productive machinery and high-end technologies meant that companies could grow at an unprecedented rate.

In the middle of 1900, many businesses were thinking out of the box, and were looking to boost their profits and market share. The technology was powerful than ever before.

It resulted in companies working hard to scale up their operations to leverage high-revenues while staying at the top of the competition. Unfortunately, this scaling leads to a complex management process lacking in agility and flexibility.

Due to this struggling, and to overcome this, companies decided to outsource their projects to third-party experts on a contract basis. It is to create a well-managed baseline of operations.

This is how outsourcing came into existence!

In the year 1990, outsourcing as a cost-saving measure, was as popular as ever. Contracts were drawn, timelines are set, and it was a smooth and hassle-free delivery of services.

So, what is outsourcing?

It is a business practice in which you hire an external organisation to perform your job or services.

Offshoring

The outsourcing model in the 90’s worked very well. Companies were satisfied with the results. With the profits they achieved, their expectations began to rise, leading them to make the most of their projects.

The only thing outsourcing couldn’t give them was a sense of ownership. Businesses want to take ownership of their projects and businesses-related process.

So, they began to search for a business model that was cost-efficient, scalable, and also that gives them complete ownership and control over their projects.

At the turn of the 20th century, offshoring came into play.

So, what is Offshoring?

It is the practice of shifting some of a company’s business operations to another country in order to take advantage of lower costs.

Outsourcing Vs. Offshoring: The Differences

Outsourcing involves contracting your work out to an external organisation to get special expertise. Outsourcing can be done in your country or abroad. The people performing your work will be employees of that third party. Your employees play no part in outsourced work processes.

For instance: Hiring an external firm (may or may not involve overseas) to manage your software development (can be non-core or other parts of the project) instead of maintaining an in-house team.

Offshoring is getting your work done from a different country under your company’s name. It is referred to a shift in your business operations to another country to reduce the cost of doing business. But they are still your own employees.

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