What is Offshoring?

What does offshoring actually mean? How does it differ from onshoring and what are the business services that can benefit from offshore outsourcing?

What is Offshoring?

Offshoring has emerged as a strategic business practice that allows companies to remain competitive and efficient. With global spending on outsourcing reaching over $700 billion in 2023, it's an area that businesses need to take seriously to remain competitive.

But what exactly is offshoring, and how does it relate to business process outsourcing (BPO)?

Understanding Offshoring

Simply put, Offshoring refers to relocating business processes or services to another country. This is typically done to leverage cost advantages, access specialised skills, and operate in different time zones. Offshoring is a subset of outsourcing where the primary distinction lies in the geographical relocation of tasks. 

Offshoring vs Outsourcing

Offshoring and outsourcing are often seen as the same thing. Although related, they are very different. Business Process Outsourcing (BPO)  involves contracting specific business tasks to external service providers. Offshoring is a form of BPO where providers in other countries handle these tasks. This can encompass a wide range of services, from customer support to IT services, all aimed at enhancing business efficiency.

Business Services that Benefit from Offshoring

Customer Support

Offshoring customer support to countries with a large pool of English-speaking professionals, such as India or the Philippines, can significantly reduce costs. However, maintaining high service standards can prove challenging.

IT and Software Development

Countries like India, Poland, and Ukraine offer highly skilled software developers at a fraction of the cost compared to hiring locally. Offshoring IT services can accelerate development cycles and provide access to a broader talent pool.

Accounting and Financial Services

Offshoring accounting tasks to countries with robust financial expertise, like Ireland, can lead to substantial cost savings and ensure compliance with international standards.

Human Resources

Many companies offshore HR processes, including payroll and recruitment, to countries with specialised HR service providers, allowing them to focus on core business activities.

Offshoring vs Onshoring

While Offshoring involves relocating business processes to other countries, onshoring refers to outsourcing tasks to a third party within the same country. Onshoring can benefit companies that want to maintain closer control over outsourced tasks and ensure they comply with local regulations and standards. Additionally, onshoring can be advantageous in industries where cultural alignment and time zone proximity are crucial.

For instance, a UK-based company might choose to onshore its customer service operations to another region within the UK. This ensures seamless communication, better alignment with local market conditions, and ease of managing operations.

Why Consider Offshoring?

Offshoring offers numerous benefits, including cost reduction, access to global talent, and increased operational efficiency. However, it's essential to understand both the advantages and challenges involved. To dive deeper into the benefits and drawbacks of outsourcing, check out our blog post on What are the advantages and disadvantages of outsourcing.

For a more comprehensive understanding of BPO and how it can transform your business, read our ultimate guide to business process outsourcing.


Final Thoughts

Is offshoring the right choice for your company?

Offshoring and onshoring both offer unique benefits and challenges that require careful consideration based on your business's specific needs and goals. It's all about finding the right balance between cost savings, quality, and operational control.
Evaluate your options carefully and consider how this strategic move can help you achieve your business goals.

Answer4u is a specialist business process outsourcing partner with over 20 years of experience working with companies across many industries. Our professional call handling abilities are backed by proven skills in developing and executing custom process workflows that either replace or complement existing systems.

Contact us today to discover how our expert solutions
can support your business growth