Outsourcing vs Offshoring: What is Right for your Business?

Outsourcing vs Offshoring

Outsourcing vs offshore development is one of the most talked-about topics in the IT industry. Both offshore development and outsourcing are often confused as single strategies but have different meanings. In this article, we will discuss outsourcing vs offshoring: what is right for your business.

Depending upon the type of project, business requirements, and other factors, some processes are better outsourced and others offshored.

What makes outsourcing and offshore development prevalent today?

Before discussing the pros and cons of offshoring and outsourcing, let’s discuss why these models have become so popular in today’s world!

The past decade has seen many companies establish a global presence. The creation of remote teams is setting new trends in business internationally where globalization is facilitating economic growth and competition. 

Recent research has proven that the scarcity of talent has doubled over the past decade which means companies are looking for different parties to source talent.

Overview of Different Models

Insourcing and outsourcing are two popular models that companies adopt for project development. While insourcing is an in-house development, outsourcing refers to an organization that contracts the work to a third party or external organization.

Want to know the difference between in-house development and outsourcing development? This guide on in-house development vs outsourcing development will help you gain in-depth insights.

On the other hand, offshore development refers to getting the work done in another country, usually for cost advantages and better availability of skilled workers. Companies choose to outsource IT services onshore (within their own country), nearshore (to a neighboring country), or offshore (to a more distant country). Nearshore and Offshore outsourcing services are considered best to save costs.

The Outsourcing Model

Outsourcing is done outside the company. The employees of your organization play no role in any work process. The main objective of outsourcing is to use the skills of experienced developers. You can outsource your business instead of hiring an in-house team, which will help your business in saving money. 

Outsourcing is mainly about hiring skilled developers from third parties as it will be helpful for your business in focusing more on marketing and financial activities. Outsourcing is beneficial when the company is earning good profit, otherwise, the expenses will only increase. 

Benefits of Outsourcing

  1. Outsourcing is a business model with low costs and therefore comes with significant savings where the maintenance of infrastructure’s cost is budget-friendly. 
  2. Hiring an outsource model is beneficial to the company in terms of working hours which means employees of other companies will work for you whenever you actually need them in your projects. 
  3. Working on projects with better knowledge and understanding of the company’s services leads to an increase in productivity and efficiency.
  4. Outsourcing your business enables you to focus more on building the brand, investing your time in research and development, and providing value-added services.
  5. Another benefit of outsourcing is the ability to stay focused on the core tasks of your business.

Few Disadvantages to Consider

  1. One of the biggest challenges with outsourcing comes along in the way of poor communication and unclear expectations.
  2. Another reason that companies avoid outsourcing is the fear of getting end products of low quality.

What is Offshore Development?


Offshoring or offshore development involves getting your work done from different countries to reduce costs and taxes. Offshore development involves the relocation of the business to another country like opening a software development center, etc. Saving labor costs is a major benefit offshore.

Want to know more about offshore development? This guide on what is offshoring to gain in-depth insights.

Here are a few Benefits of Offshore Development

  1. In offshore development, the company involves full control over its core business. 
  2. Another important benefit in developed countries is to recruit skilled developers specializing in software development and production.
  3. Offshoring and scalability go hand-in-hand providing a good opportunity for the company to scale its business.
  4. Lowering costs is the major benefit of offshore outsourcing.

Offshore Development Also Comes with a few Disadvantages

  1. Collaboration with a team in a different time zone can be challenging for companies as it leads to slow delivery time and time-to-time communication.
  2. Language and cultural barriers are other disadvantages of working offshore which lead to poor communication. 
  3. When the infrastructures are moved to different countries, there is a risk for the local workers to lose their jobs.

Outsourcing vs Offshoring Development

Outsourcing and Offshoring are the two different business models implied by many organizations internationally consisting of distinctive pros and cons. 

No matter what the size of a company is, whether you run it or you are a part of an organization, outsourcing and offshoring can be extremely beneficial.

They both are beneficial in reducing costs and improving business performance by delivering high-quality services. Let’s quickly compare outsourcing vs offshore development.

OutsourcingOffshore development
Outsourcing refers to assigning business tasks and operations to an external organization or third party. Offshoring refers to relocating the business to a different country.
Outsourcing can be done in the same country.Offshore development services can only be done outside its primary country.
The main objective is to focus on the core functions and activities of the business.The objective is skilled labor cost.
The work performed in the outsourcing company is done by external parties and not by the employees of the organization. The work performed in offshore development is done by the employees of the organization.
Less control over the activities that are carried over outsourcing.They are completely responsible and have higher control over the activities offshore.


Lastly, it’s all about choosing the right option depending on your project needs (outsourcing vs offshoring development) and objectives as both options are growing rapidly worldwide. Earlier, the concept of outsourcing was used by a few companies, while now most of the big companies opt for it.

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