Outsourcing vs Offshoring
Outsourcing and Offshoring, to understand the difference between these two business concepts, we first need to clarify the meaning of outsourcing. It was outsourcing that came into existence first and later on led to development of Offshoring. When some huge corporations decided to get some aspect or aspects of their business operations be looked after and performed by smaller companies to save money or to escape from hiring of new employees, it was said that they outsourced some of their business activities except core activities to other companies. For a long time, this outsourcing flourished but was confined within national boundaries.
It was only later that the idea of getting done business operations from another country. The so called third world companies had cheap labor in abundance and had the required proficiency to carry out the tasks required by big companies in the west. This process of getting some business operations done from another company in another country was called offshoring and it meant cutting down of expenses for big companies in a huge manner. Soon many offshoring companies sprang up in poor countries as they got better wages from companies in the west for the work they performed.
Initially, western countries got outsourced and offshored only low skill business operations such as assembling and call center management. But later, these offshoring companies proved their efficiency in performing more complex tasks. They completed the tasks in a proficient manner and at the same level as companies from west could do them. This was like a windfall for western companies as they no longer needed to hire expensive employees from within the country and could get the work done in an efficient manner at much cheaper cost from these offshoring companies. This is a win-win situation for both offshoring companies as well as companies in the west as skilled workers in poor countries got better wages, and because of poor exchange rates of the countries, companies from western countries could still save substantially on wages. They also saved from hiring skilled workforce from their own countries which translates into huge savings.
Though initially there were problems of communication and cultural differences also raised there head but in due course of time these countries developed a workforce which was highly proficient in the language of western countries which in majority of the cases is English. The examples of China, Korea, India, Pakistan and many more countries proves that outsourcing and offshoring is here to stay despite angry voices raising their head in countries like US, UK, Canada and Australia. Business is all about saving and generating profits. Today a government cannot force companies to hire local employees if the company is able to cut down on its operational cost through outsourcing.