Outsourcing

Outsourcing and Offshoring: The Difference and its Impact to the Business

Abstract

The purpose of this paper is to clarify the difference between outsourcing and offshoring and its impact in the performance of businesses specifically here in America. First, after we briefly clarify the difference outsourcing and offshoring and how it all begun, we will analyze the benefits and drawbacks of outsourcing and specifically offshoring for different segments of the society. Second, we will look at the trends, happenings and development of both outsourcing and offshoring during the past decade. Third, we will judge the future of outsourcing and offshoring on the basis of past trends and present economic climate. As some services become more like products, both low-skilled and high-skilled jobs are subjected to productivity growth through standardization and digitization. It is argued, however, that the future of business-service productivity is on a knife-edge, depending on the mix of two sources of productivity enhancement—namely greater standardization and capturing value from customized solutions.

For the sake of simplicity, the term outsourcing will be used more often unless referring to in-house jobs being ship overseas then the term offshoring will be used.

Outsourcing and its Impact to the Business

Very often outsourcing is used mistakenly in the place of offshoring, whereas in reality the two terms can have different meaning. Outsourcing occurs when a company contracts a specific process out to a third party, finding someone who specializes in whatever needs to be done. Offshoring happens when businesses send in-house jobs overseas. Both may save company money, but only offshoring specifically means sending jobs out of the country 2. Outsourcing and offshoring has been of existence for a long time but in the past thirty years, we have witnessed how outsourcing and offshoring has gone through several phases, on one side it was welcomed as a...