In the last two decades, there has been a significant shift in the way global business is conducted. Gone are the days when companies would conduct all their activities in-house and preferred to have every person under their own payrolls. This was the norm in large corporations driven by a large pool of workers as this gave management complete control over their business process. With the advent of modern technology in terms of state-of-the-art manufacturing equipment, IT hardware, automated assembly lines that required less human intervention, that model became counterproductive. The proliferation of small businesses also meant that having people under payrolls proved costly and there was a need for a business model that offers businesses the same flexibility and at the same time ensured a high return on investment. In came two business models, ‘outsourcing’ and ‘offshoring’ and changed the business landscape forever.
Most people tend to use these term in the same breath and interchangeably but by definition and practice they are polls apart. Outsourcing by definition involves delegating certain tasks or work to a third-party which offers better skills and infrastructure, expedites the process and cuts cost. Offshoring, on the other hand, refers to getting work done in a different country often to leverage the cost advantage.
It is possible to outsource work and not offshore it, such as hiring an IT maintenance company from your city instead of having an IT team under your payrolls. Similarly, it is possible to offshore and at the same time not outsource work.
An example of this can be giant IT companies having offshore software development center in countries such as India and tapping the vast pool of talent and cutting costs at the same time. Now the big question that arises which is better, traditional outsourcing or offshore development center?
Should your business Outsource or Offshore? Find out!
Let us take a look at the various pros and cons that both Outsourcing and Offshore Development Centre have.
Focus on Core Areas
Outsourcing allows you to free your internal resource from mundane tasks and allows them to focus on the core areas of your business.
Access to Skills
Outsourcing offers you access to a better pool of skilled people that improves your business process and creates an innovation based environment.
You fix the budget for every project and pay only for the work done and don’t partake in the overhead costs of your service provider.
This model allows you the flexibility of scaling up and down the project flow based on your exact needs.
Lack of Control
You exercise minimum control over how your projects are executed as most companies won’t assign dedicated resource or dedicated work hours.
Outsourcing is a bad model if you are looking at a long-term project, as in this transaction model most companies don’t promise long term commitment.
Since they are working with multiple clients at the same time not signing an NDA can put your proprietary information and privacy at risk.
If you haven’t got your choice right you may have a hard time communicating with the team due to linguistic barriers.
OFFSHORE DEVELOPMENT CENTER: Pros
Offshore development centers are bound by contractual commitment and thus work as an extension of your team offering you more control.
You would benefit from a dedicated workforce who would work only on your project based on your business’ evolving needs.
You would be a part of the talent acquisition process for your project with most ODCs, and this allows you to hire the best available talent for your needs.
With an ODC you would be able to adopt a strategic approach and set long-term business goals something that is impossible with outsourcing.
OFFSHORE DEVELOPMENT CENTER: Cons
Though maintaining an offshore development center offers you cost advantage, it is far more costly than outsourcing the job. You may have to pay for the infrastructure and overhead expenditure.
Long Term Commitment
With an offshore development center, you would need to start with long term commitment which often means putting all your eggs in one basket.
To sum up, you can clearly see that both traditional outsourcing and maintaining an offshore development center have their own pros and cons and as a business you should make your choice based on specific needs, the scope of your project and duration. A better model has emerged which is termed as offshore outsourcing that offers you the best of both.
Read Also : Offshore Development Center – An Option to Start OWNED Company in India
If you are looking for a company that offers you the best of both, Semaphore Software would be an ideal pick. We are pioneers of offshore outsourcing services in India catering to clients across the globe. Our hand-picked workforce, in-depth domain knowledge and wide bouquet of services will add value to your business. If you wish to know more, write to us at email@example.com.