What is Offshoring?
Offshoring VS outsourcing are two different things when it comes to reducing the overheads to run a business, though both have the same objective; cost minimization to complete specific or general tasks within a business.
The day-to-day running of a business does not need to be done with personnel being physically located in the same room, floor or even in the same city. Technology has allowed the globalization of companies to successfully expand many parts of their operations to other countries, all operating under the guidance of a primary head office.
This silo approach requires a manager, who is in charge of specific location, to report to their superiors located at head office at the discretion of the company. International flights to business summits and thus long travel periods away from one’s family are common if you work for a multinational company.
Although this model still exists today, it is slightly archaic in that it is not just the larger corporates that are taking advantage of the cheaper resources available in overseas countries.
It is possible now, through the use of the Internet to hire people to work for your company in these overseas countries at a rate that can be significantly cheaper than hiring a local resource.
There are many advantages of offshoring parts of your business:
- The need for localized office space is reduced so many decent-sized companies – particularly those who have an ecommerce business (for example) can run their business from a home office.
- A step up from this, is opting for a co-working space, also a practice that is becoming increasingly popular, and companies such as WeWork have seen exponential growth as small, medium and large businesses downsize their own office space to move into co-working environments and serviced offices. Again, this can be achieved by offshoring parts of the business, thus eliminating the need for a larger office space.
- Many of these spaces offer WiFi, printing facilities, kitchens, bathrooms and even gyms, all-inclusive in the monthly costs of “renting a desk” or a space within these sorts of environments. Downsizing the team or allowing staff to work from home means that costs from office expenses can be reduced significantly – helping with business profitability.
- It is entirely feasible to have a larger staff, operating from another country, whilst the core business operates from a smaller office than it used to. This is a very common cost-saving tactic employed by many businesses today.
But, what is offshoring? And what is the difference between offshoring and outsourcing?
Offshoring is the practice of delegating tasks to individuals or teams that are dedicated to your business on a full-time or part-time basis. These individuals or teams are located in countries like the Philippines or India (but the term “offshore” can be anywhere in the world) and can operate exactly like a staff member would sitting next to you. They have an email address that is your company, they can handle tasks ranging from various degrees of complexity and they can attend staff meetings, albeit remotely through software solutions like Skype and Zoom.
Outsourcing is slightly different, in that it refers to tasks within your business that you delegate to be handled by an individual or a team that is outside your business. This could be a referral partner, or a reciprocal business relationship you have with another company. Outsourcing does not necessarily mean that you have delegated these tasks to someone offshore, but the desired outcome of the two is the same – to cut down on business overheads.
Either of these models work well but creating a team of what is staff dedicated to your company offshore is a fantastic way to reduce your staff costs, minimise your need for a large office whilst still delivering on your core product and services. The cost-savings can simply be redirected into marketing, or business development personnel so you can continue to scale the company.