Offshoring vs. Outsourcing

Key differences & our definition Contact Us
Offshoring & Outsourcing - Our Definition

Even within our own industry there can be an element of disagreement between the two phrases!

You may already be thinking of many other similar, (yet unrelated) terms i.e. Virtual Assistant,  Virtual Talent, Freelancers, Virtual Offices…throw in some even more modern terms like; Co-working, Collaborative Working and Crowdsourcing…it’s no wonder people can become easily confused!

Outsourcing
In our view, traditional Outsourcing can be defined in a Professional Services context. Whereby, a completely external business to your own (with their own objectives, methodologies and interests) completely takes over a function for your business.

Your role is generally hands-off at this point outside of scheduled reporting and when things aren’t delivered in a timely fashion. They complete the work on their premises, with their staff, under their own methods, within their systems and databases, according to either a Service Level Agreement (SLA) for long term engagements or a Statement of Work (SOW) for project-based delivery..

Offshoring
Offshoring still involves having a team of people complete work on behalf of your business, however this is where the similarities cease. With an Offshore Individual, Team or Department, the individuals are your own employees…simply based in an alternative location. They are under your supervision, they use your systems and interface with you directly and openly as often as you wish. They submit timesheet for approval, through this you also have ability to cost control.

GBSS maintain our own definition of the terms in order to provide clarity to clients. We’re able to accommodate both service types, but we favour Offshoring for our clients.

Key Features & Benefits

The inherent benefits of Offshoring over Outsourcing can be summarised quite easily in 5 simple points:

  • Control
  • Risk
  • Privacy & Security
  • Knowledge
  • Cost

Control
Offshoring means you stay in control over your existing business processes. You’ve likely fine-tuned your processes over the years, retaining control allows you to ensure things running smoothly and work is completed to spec.

Risk
The are many exceptional Outsourcing & Professional Service providers out there. However, sometimes things don’t go to plan, your work is assigned to someone with the wrong skill set or, simply the wrong provider for the job is chosen…by this point the contract is signed and in place.

When you Outsource, it can be argued that you also outsource the risk as the Outsourcer is responsible for delivery. It can also be said you also expose additional risk; What if the unfortunate happens with a mission critical project? or, Due to negligence by a processor, an Australian Regulation is breached by those acting on behalf of your business? …guess who pays the fine?

Privacy & Security
Customer, employee & financial information can be compromised in both Outsourcing and Offshoring. We consider Offshoring to limit this risk to negligible levels. The primary reasons for this are that through the Offshoring model, you are able to use your own existing systems, dictate reporting schedules, implement your own procedures and hire your own Supervisors and Managers to oversee compliance.

Outsourcers recognise this, and many provide relatively transparent access to offices, systems and procedures. It still comes back to you, or your client’s data having the potential to be used in someone else’s productivity systems and databases. Then of course there is still addressing Privacy Act compliance and other related laws unique to your industry.

Knowledge
Intellectual Property is at the core of value for any business. Relating back to the above point, if new systems or procedures are developed and implemented to better handle aspects of your business, then these may not flow back to your business at all or be recorded in your systems. You may decide to take the outsourced function back over, only to realise it’s all changed and you are no longer up to speed.

Offshoring avoids this, as your Offshore Teams are your employees. They have open lines of communication, are using your systems and report as often as you require them to. This allows you to capture innovations, changes or issues as and when they happen.

Cost
Finally, Cost is quite straight forward and ties in with Control. Offshoring allows you to grow and reduce your team as you need to. It in addition provides more granular control via time-sheeting and the ability to monitor work in progress.

Outsourcing is most certainly regarded as also a great cost-reducer, however it has a pitfall in that depending on your contract terms, there isn’t always a sure-fire way to verify who has done what, and when. If a project has gone off the rails and your terms don’t allow for it, you can end up watching the invoices arrive while the issues are fixed.

SUMMARY  
Both methods have Pros and Cons. We are happy to weigh these up for you when you enquire. As you can see, however, we feel in most cases, the Offshoring method provides much higher levels or assurance and a more rewarding experience for those seeking to put in place a BPO model for a Team, Project or Department.

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