Babu Venkatachalapathy
September 4, 2024
A 2021 report by McKinsey & Company reveals that 87% of the companies worldwide are skeptical of a skill gap within their organization. While 43% of the respondents believe they are already faced with a skill shortage, 22% said they anticipate one in the next two years.
As a result, many companies rely on overseas talent to compensate for the skill gap in their homeland. Two main components of this trend are engaging offshore staff and outsourcing. Let’s take a closer look at them and understand their differences.
What is Offshore Staffing?
Offshore staffing involves hiring employees from different countries and having them carry out all or part of your business functions.
What is Outsourcing?
Outsourcing is when you deploy a third-party service to complete work for your organization.
Offshore staffing Vs. Outsourcing- What is the difference?
Although both methods are used for increasing the efficiency of business functions, there lies a fundamental difference between the two. Your offshore team is an integral part of your in-house team, except they work from a different location than yours and are not required to be in the office. In this case your team is still responsible for the deliverables. On the other hand, outsourcing service providers are third parties and own the deliverables, meaning they get the work done on a project-to-project basis.
Consider an example. Let’s say you want to set up an e-commerce store to sell products online, but your company is running short on the required skill set. Now, you have two options: contract the entire project to a third-party firm or hire competent candidates from another at minimal rates. The former strategy is outsourcing, whereas the latter is offshore IT staffing. Offshore staffing agencies help you find and recruit skilled talent from across the globe with minimum hassle.
Benefits of Offshore Staffing & Outsourcing
Outsourcing and offshoring present excellent opportunities for businesses to improve efficiency and maximize profits, Here’s how:
1. Opportunity for massive cost-saving
Outsourcing- Deloitte says that about 70% of the companies outsource part of their business operations to save on significant expenses. Outsourcing helps companies cut back on costs like employee benefits, training, equipment, and other resources that would’ve otherwise been needed if work was carried out in-house.
Offshoring– Developing countries like India, the Philippines, Mexico, and others are some of the most sought-after locations for offshoring due to the lesser cost of living and favorable government policies. For example, a detailed comparison between Indian and US salaries shows how offshoring helps companies save up on a huge number of expenses. Hiring offshore staff helps companies employ skilled talent at much lower wages than the homeland and leverage tax-related benefits offered by respective governments.
2. High-quality work & improved efficiency
Outsourcing– Some projects may require specialized skills for their execution. However, it may not always be possible for you to have those skills in-house. This is where outsourcing services come in handy. They are well-equipped with the human resources and latest technology to carry out your work efficiently and deliver high-quality results.
Offshoring– Some companies consider engaging offshore staff a strategic necessity when filling up skill gaps and maintaining the quality of work. The offshore staff brings a new set of skills to your organization, raising the efficiency and standard of work. Offshore staff bring with them a new set of skills to your organization which raises the efficiency and standard of work. Make sure you keep up with the latest trends in offshoring to make the most out of it.
3. Access to new marketing opportunities
Outsourcing– Outsourcing has always been a powerful tool for globalization. Contracting work to third-party organizations helps you access a vast pool of talent globally. With world-class talent and expertise at your disposal, you can quickly bring in new products and services to compete in the international market.
Offshoring– Almost like a ticket to expanding overseas operations, recruiting offshore staff provides firms access to global markets. Hiring a workforce from different geographies helps companies increase their visibility internationally. Moreover, it allows them to leverage a region’s local resources and research new audiences.
4. Improved focus on core competencies
Outsourcing– By outsourcing the non-core functions of your business, you can free up your in-house team to focus on more strategic tasks. They will then have the time and resources to invest in brainstorming, scaling up, and carrying out core competencies with full attention.
Offshoring- Similarly, when you employ offshore expert staff for specific business functions, the work gets distributed effectively. Consequently, your in-office team is left with tasks other than those central to your organization’s functioning; hence, they can give their best.
Conclusion
Every organization may be unable to experience the benefits of offshore staffing and outsourcing similarly. As both strategies come with some upsides and some downsides, there is no straight answer to which one is better. Consider weighing all your options before investing your time and money into them.
Go for the one that best serves your needs and aligns with your business goals. Who knows, a combined approach may be the best where you offshore some part of your operations and outsource others!