Discriminate Outsourcing vs Offshoring
What is the same meaning from Outsourcing vs Offshoring?
The terms “outsourcing” and “offshoring” are often used almost synonymously in much of the popular literature today. They seem to be all about “hiring external resource to take a job of the business owner”. And the key purpose of them is both to take advantage of lower costs.
But that’s is the same meaning made by the target of behavior. There is a technical difference.
What is the difference between Outsourcing vs Offshoring?
In a short talk:
- Outsource means to obtain (goods or a service) from an outside or foreign supplier.
- Offshore means to relocate (a business or department) to a foreign country to take advantage of lower costs.
When a company outsources, it buys from a third party a part or service it used to produce itself. This does not necessarily mean that the product is outsourced abroad, although it can be. For instance, General Motors, a US company, can outsource production of a certain car part to a Vietnamese company. The Vietnamese company, in turn, can outsource production of various components of that part to various other Vietnamese companies.
When a company offshores, it shifts the location of a service or production of a part to a location abroad. This can include companies who outsource to foreign companies – for example, GM offshores production of a certain part to a Vietnamese company, and the Vietnamese company outsources (but does not offshore) various components of the production to other Vietnamese companies. However, offshoring also includes companies who transfer production or services to a location abroad without outsourcing the job. So, for instance, if GM opens a factory in Vietnam, and shifts production of a car part to the factory in Vietnam, it is offshoring but not outsourcing – it is still an American company running the factory rather than a Vietnamese one.