Offshoring vs outsourcing at a glance
Offshoring moves work to another country. Outsourcing hands work to another company. The first is a decision about geography, and the second is a decision about responsibility. Most confusion in this area comes from treating them as one choice.
What offshoring means
Offshoring means moving work to another country. A company that opens its own development office in Poland has offshored, and nothing has been outsourced: the people are still its employees and the accountability stays in-house.
Offshoring decisions are about cost, time zones and access to talent. When the decision is only about location and you still manage the people, it’s usually described as offshore staffing.
What outsourcing means
Outsourcing means handing a function to an external provider who becomes responsible for delivering it. Where the provider sits doesn’t matter. A London company using a Manchester agency has outsourced without offshoring.
Outsourcing decisions are about accountability. The model most often mixed up with outsourcing is staff augmentation, where the provider supplies people and you stay accountable for the work.
How offshoring and outsourcing combine
Scroll the table sideways to see every column.
| Where | Kept in-house | Outsourced |
|---|---|---|
| Domestic | Your own local team | A local agency or partner |
| Offshore | Your own office or captive centre abroad | A managed offshore team, such as Azendo |
All four combinations are valid. Problems start when a company believes it has chosen one and has in fact chosen another, and only finds out when something goes wrong and it’s unclear whose problem it is.
What business process outsourcing means
Business process outsourcing applies outsourcing to a whole business function, such as payroll, customer support or finance operations. It’s a type of outsourcing that’s often offshored, which is why the three terms end up in the same sentence so often.
How to answer both questions
To settle offshoring vs outsourcing, ask the two questions one at a time. Do you want the work done in a lower-cost location or a different time zone? That’s the offshoring decision. Do you want someone else accountable for delivering it? That’s the outsourcing decision. The answers are independent of each other.
At Azendo, your team works from our offices in Thailand, which is the offshoring part, and accountability for delivery sits with us, which is the outsourcing part. It’s a managed offshore team, set up through software development outsourcing under one agreement. Many companies choose it to hire remote developers without opening an office abroad.