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  • Feb

    Offshoring Vs Outsourcing, The Pros And Cons

    Filed under: Business Services;

    Since most businesses, regardless of their size, thrive to earn profits, they may either outsource or offshore their business activities. It should be noted that there are some differences in both these strategies, although the meanings are often interchanged. This article highlights the differences and discusses the advantages and disadvantages entailed in them.

    Outsourcing Vs. Offshoring

    With outsourcing, a third-party company is hired to carry out the project. Thus, BPO companies in Manila will need to hire their own staff, software, and other resources to complete the project at an agreed cost to the given timeline. On the other hand, offshoring is the process where the company re-locates a part of their business usually to a different (offshore) location. Thus, a trusted partner will be engaged who will hire staff and other resources needed. When comparing these two strategies, the following can be summarised:

    • Control
    • Costs
    • Privacy and Security
    • Risks

    Who is in control?

    With offshoring, you are always in control! The staff in both colocations will follow the same processes that you are familiar and have been tried and known to give results.

    With outsourcing, you have no control whatsoever and at times they (the outsourcing partner) may not be transparent.

    Cost cutting?

    Yes, both offshoring and outsourcing are strategies that are cost savings! Offshoring to Philippines is a good example, as the companies can tap into their cheap but high skilled labour market.With offshoring, there might be a high initial cost since a lot of effort to finding a trusted partner who can help you to set up your business elsewhere. However, the savings will be visible in the long run and not initially.With outsourcing you will not have to worry about setting up a business, thus keeping start-up costs less. However, it is important to have a robust agreement, otherwise there may be additional costs incurred when trying to correct if something goes wrong!

    Privacy and Security?

    In general privacy and security is compromised with both these strategies. However, this risk is almost eliminated with offshoring as the staff are your employees and use your systems and you are in control. In the outsourcing strategy, this is recognised as a risk and companies do offer a transparent process, where you can monitor and audit their system for problems. However, this cannot be always guaranteed.


    Hiring the right employees is important to the success of a businessWith offshoring, you have the option for attracting the right skills to do the job. You will often use the same processes to employ persons of high skills.

    With outsourcing, you will not have this luxury! There is a risk of hiring the wrong skills and the project going horribly wrong! Thus, important to have very clear terms and conditions or a Service Level Agreement with the outsourcing company prior to commencing work.


    Since both strategies have their own merits and demerits, it is always recommended to seek for an expert opinion. There are several consulting companies who can provide their expertise to help you make your mind.

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