Offshore and Outsource

Companies try to find a way to keep themselves alive, competition is harder, more and more companies are dealing with the same services, manufacturing the same products, this way becoming rivals. This is a true battle, a battle for customers. Companies must get customers to use their services or buy their products. They can’t simply say “hey, I’m better than the other one”, it doesn’t work. In order to be indeed better, you must prove you are better.

How can a company become better? Normally, if it provides the best services or products on the market. But what if more companies provide the same quality level? In such cases, it’s all about the money. Who provides those services for less money, wins the game. As we all know, several strategies exist to increase productivity or to lower production costs. If you use very advanced technology, your products or services will be much better, and this is also the case when hiring new employees, professional ones, to work better. Sometimes, these developments are very expensive. Not every company can afford getting new machines or hiring new employees with larger salaries. So what can a company do then? It can choose to outsource or offshore.
Outsourcing and offshoring are messed up by people. Some think these are the same. That’s really wrong, since even if outsourcing may involve a certain amount of offshoring, there are very significant differences.

Outsourcing is assigning your project or task to a third-party company or individual. Offshoring is moving some business unit inside a corporation or company from one country to another, but not involving third-party companies.

Outsourcing is a major trend, and targets countries with emerging economy like India or China. These countries have a lot of labor force, and their people provide quality work with less money. The main reason for this is fighting to earn a living. Some people just want a piece of bread to eat, and some money to feed their families with. They have no special needs, they would do almost anything to get some money and survive. Yes, it’s like a jungle, you fight for survival.

What’s the case of offshoring? Let’s think about a shoe manufacturer. He owns several companies in several countries. He will rather offshore shoe production from USA to China, since his USA manufacturing costs are much higher than China manufacturing costs. Then he will bring those shoes to USA, and sell them there. This is something done internally, no third-party involved.

Offshore and outsource are two similar business trends, but they never should be mixed up or misunderstood. Always make sure you know the difference between them.