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Offshore Outsourcing vs. Onshore Outsourcing

There are various factors you must think about when deciding whether to use an offshore outsourcing approach or the onshore outsourcing model. These factors vary from budget needs and accessibility to language and culture. Offshore outsourcing involves engaging a 3rd party organization that is situated in another country. Onshore outsourcing is also referred to domestic outsourcing which means the business hires a company within the country it operates in.

One of the many strengths of onshore outsourcing is that it is possible to have a face-to-face conversation with your outsourcing partner when the situation requires it. Language barriers and adaptation of new business culture is not an issue when using onshore outsourcing services. Outsourcing domestically therefore provides a familiar means of communication with your outsourcing partner. Unfortunately, outsourcing locally especially in developed countries such as the US is very expensive. Onshore outsourcing is not only more expensive than an offshore outsourcing partner but can also be more expensive than doing the process in house.

It is because of these drawbacks that countries in developing countries such as the Philippines and India have become ever more attractive as destinations of outsourcing services. The availability of the Internet has also enabled businesses to contract freelancers from all over the world. Such freelancers can complete the projects given to them at a much lower cost than an in-house salaried employee. This increases the capacity of small business’ to compete with larger corporations.

Workers in these countries can meet a business needs at a low cost. In fact, direct financial savings is the most powerful argument for the offshore outsourcing approach. As compared to domestic outsourcing in developed countries, labor is relatively cheaper due to the low minimum wages in these countries even for highly skilled personnel. Offshore outsourcing service providers in these developing countries have over the years grown and developed advanced infrastructure that enables them to provide world class services.

But offshore outsourcing has its downsides. There are costs to outsourcing offshore mainly around travel expenses and the language barrier. Language is especially an issue when outsourcing call centers and programming tasks that require some minimum level of competence in language. Also, offshore outsourcing is not always cheap across the board. Procuring the services of the best and most reputable offshore companies does cost and may in certain cases override any costs savings a business may have hoped to gain from the relationship.

Daven Michaels Author of the book Outsource This!

3 Responses to “Offshore Outsourcing vs. Onshore Outsourcing”

  1. mike says:

    with this information I am now on my way to 123Employee and try to outsource some of my workload.. thanks Daven!!

  2. Karen says:

    Very informative!

  3. This is very informative. This is the right differentiation. At last it depends upon the outlook of the Company board of directors.

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