Outsourcing vs. Offshoring

Outsourcing vs. Offshoring.




Lately there have been a lot of individuals denouncing outsourcing – stating that they want to keep jobs from going overseas. That is a good position to take in my opinion. However, it got me thinking about semantics and how people view the business of outsourcing.



To start, what people are talking about is Offshoring. Offshoring is the tactic of having services provided by someone in another location typically done for financial reasons. Why have a room full of tech-support people in America where you have to pay industry driven wages plus overtime plus benefits when you can get someone in India to provide the same (well, close to the same) service for less than half the price. This is good and bad – the good is that it helps companies create, sell, and support products at the low price that we consumers demand. The bad is that it moves jobs away from America – jobs that Americans need.



Outsourcing is the process of having another company or other people do part of your work for you. This is more common than people think and EVERYBODY does it. In the construction industry, you outsource jobs to sub-contractors because you don’t have the manpower, the time, or don’t have the expertise/certification in a particular field (for example, asbestos abatement). Other examples include having your CPA calculate your payroll taxes for you or taking your vehicle to an oil change service to have them change the oil (both are items that you can do, but typically outsource). The top reasons people outsource is because of cost, time, and compliance necessity. For example, a payroll service which handles hundreds of clients can typically process your payroll for less than you can do it yourself. This gives your payroll person more time to work on revenue producing/saving tasks such as sales revenue forecasting or P&L ledger work. Lastly, a payroll service will always be up-to-date with the most current tax tables and IRS rules.



Bottom line is that people outsource for good, sound business reasons. Think about how many different services that you could potentially do yourself, but allow another to do it – and why you went that route.