Key Differences Between Outsourcing And Offshoring

Both outsourcing and offshoring are practices of shifting in-house business functions and tasks outside the office. However, there are several differences between the two practices.

March 28, 2024


5 minutes

Om Shukla

Om Shukla

Key Differences Between Outsourcing And Offshoring


Outsourcing and offshoring have similar meaning so many people often get confused and use the words interchangeably. While both involve delegating certain tasks or processes to external parties, they differ significantly in their execution and implications. When it comes to managing customer service operations, making the right choice between outsourcing and offshoring is crucial. This decision can significantly impact a company's ability to deliver quality support while optimizing costs and resources.

Regarding optimizing call center solutions, SquadStack offers comprehensive call center outsourcing services tailored to meet the unique needs of businesses. Before delving into how SquadStack can revolutionize your call center operations, it's essential to grasp the critical distinctions between outsourcing and offshoring. To understand how each strategy can impact your business objectives and bottom line, let's dive deeper into this fundamental disparity.

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What Is Outsourcing And Offshoring?

Outsourcing and offshoring are both practices of shifting in-house business functions and tasks outside the office. In outsourcing, companies contract a third-party vendor to perform specific tasks for a shorter period. It includes website development, graphics design, etc., which the company can outsource. Offshoring, however, is generally done for an entire department or function. For example, production, finance, HR departments, etc., have shifted to different countries. One of the key reasons for choosing outsourcing and offshoring is cost reduction. In both cases, companies analyze the cost-to-productivity ratio to make the final decision. 

However, one key difference between outsourcing and offshoring is the scale of operations. Generally, outsourcing is done when the scale of that particular activity is relatively small. Thus, it doesn't sound financially sensible for companies to keep a dedicated team for that activity. However, offshoring is economically viable when the scale of the operations is significant because setting up a business unit in a different country is an expensive affair in the short run.

Key Differences Between Outsourcing and Offshoring

Many differences between outsourcing and offshoring help us distinguish between the two activities.





Done for a specific task or service such as accounting, software development etc.

Done for an entire department or support functions such as Legal, Finance, customer support etc.


Can be international or domestic in nature. 

Shifting some operations of the company to a different country


Outsourced to a third party vendor.

Can be contracted to a third party vendor or could be done by the company itself.

Primary Motive

Cost cutting may also be one of the reasons. 

Primary reason could be cost cutting, but it is generally done to utilize different time zones and operate 24/7

Secondary Reasons

To gain access to specialized skills, and improve efficiency.

To gain access to global talent pool


Example - Freelance graphic designer, payroll processing company, IT support team

Example - Manufacturing plant in Vietnam, customer service center in India, software development team in Canada

Pros and Cons of Outsourcing and Offshoring

Both activities provide several benefits to small businesses and large MNCs. Along with benefits, there are several limitations. Here are some of the pros and cons of outsourcing and offshoring.

Benefits of Outsourcing and Offshoring

Cost Advantage

Outsourcing and offshoring both are considered when a company wants to cut costs. Shifting operations to a place where labor costs are low can significantly reduce the overall finances. This is one of the reasons why big MNCs set up their back offices and support offices in India.

Access to Specialized Skills

Often, companies practice outsourcing and offshoring when the required talent is unavailable in the corporate office region. For example, a company located in a remote location that needs tech talent will outsource its software development to a dedicated software development company in a metropolitan region.

Focus on Core Competencies

Outsourcing non-core activities to third-party vendors frees up space and resources, which can be better utilized to improve core competencies.

Flexibility to Scale

Outsourcing gives companies the flexibility to scale. During lower demand, they do not have to lay off; companies can scale down operations by contacting their vendors.

Different Time Zones

Offshoring allows companies to utilize resources efficiently and conduct operations around the clock. For example, if a company has a corporate office in Canada, they can offshore a setup similar to India; this way, when the Canada office is offline at night, the work will continue in India as it's daytime.

Access to the Global Talent Pool

Offshoring allows companies to leverage talent from around the globe. This practice is prevalent in Data Analytics, IT, Call centers, and more. Most significant MNCs outsource their IT- and Data-related operations to India, as they get access to skilled labor at lower costs.

Cons of Outsourcing and Offshoring

Quality Concerns

The biggest issue with outsourcing and offshoring is quality management. When the process is outsourced, companies lose control over monitoring quality, suggesting and implementing changes, etc. If the task is in-house, companies can instantly identify and fix the quality issues immediately.

Data Security and Privacy Issues

Data security is a huge threat today, as during outsourcing and offshoring, companies will have to share sensitive data with the vendors to ensure smooth functioning. This data transfer can hurt the company if there is a breach in the vendor's system.

Lack of Efficiency

In outsourcing, the vendor will have its managers and employees. It may become difficult to manage or communicate with the offshore team due to various factors. This can lead to inefficiency in the process and result in negative productivity.

Outsource a Sales And Operations Team With Squadstack

If you want to outsource your call center operations, we have a perfect set of solutions for you. SquadStack offers various call center services, along with omnichannel outreach. With SquadStack, businesses can avail a pre-trained, industry-ready distributed workforce of 10000+ callers present across India to:

  • Connect with leads and customers via omnichannel like Voice, SMS, IVR, and WhatsApp and improve your lead connectivity rates
  • Manage entire campaigns through one platform and get real-time campaign updates.
  • Scale with flexibility even during seasonal demands with our usage-based pricing model.
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What is the difference between outsourcing and offshoring?


Outsourcing means contracting a third-party vendor to perform a specific task, whereas, in offshoring, companies shift a unit of their business to a different country.

What is outsourcing and offshoring?


Both outsourcing and offshoring are practices of shifting in-house business functions and tasks outside the office. Both practices allow businesses to reduce costs and focus on core business activities by shifting in-house operations to a different strategic location.

What are the different outsourcing and offshoring business services?


MNCs, such as call centers, accounting, software development, HRM outsourcing, etc practice various types of outsourcing and offshoring.

What is the difference between onshore and offshore outsourcing?


Onshore is also known as domestic outsourcing, where companies outsource some of their business processes to a third-party vendor in the country of operation. In contrast, offshore outsourcing companies outsource the activity to a different country.

What are the examples of outsourcing and offshoring?


Examples of offshoring include shifting manufacturing plants in Vietnam, customer service centers in India, and software development teams in Canada. Examples of outsourcing include marketing activities, content writing, designing, and accounting.

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