What is the difference between outsourcing and offshoring? What are the benefits of each? Which one is better? Grasping these concepts and understanding their features can help investors to make wise decisions regarding their business operations. If you want to know more about these concepts, keep reading.
What Is Outsourcing?
Outsourcing is a practice in which a company hires a third party company to provide certain products or services. The reason to do it is that the costs of outsourcing are way lower than carrying out the activities inside the original company and investing in equipment, organization, and employees, to mention some.
The following are some key features to a better understanding of outsourcing:
- Can be performed in the country of origin or another one
- It usually represents a lower cost for the company
- It can provide specialized services or products
- It is required for specialized products or processes
What Is Offshoring?
Offshoring is the business practice in which a company relocates the whole plant or a certain area of the plant to another country. The new plant is now in charge of carrying out certain processes or manufacturing the whole production there.
The following are some key features to a better understanding of offshoring:
- The relocation can be in any country, far or near
- It usually represents a lower cost for the company
- It usually represents a low cost but highly specialized labor
- Companies choose countries that offer an exemption from taxes
Differences between them
As you can see, outsourcing is sometimes confused with offshoring because it provides similar benefits to the companies, but in reality, they are quite different. While outsourcing can be in the same country or a foreign one, offshoring is always in a different country. A key feature that can help understand the difference between them is that in outsourcing companies only pay for precise services or products, while in offshoring everything is carried out by the same company but with people in another country.
If you want to get to know more about offshoring and outsourcing, as well as for deciding which one would be better for your company, we are here for you. At Tijuana EDC, we provide professional services regarding international business, investment, and maquiladoras in Tijuana. Contact us!
