Is outsourcing the same as offshoring?

Is outsourcing the same as offshoring?

 

In short, no. 

But we won’t end the blog there, because this is one of the most common hesitations from firms who are new to the idea of outsourcing, or just starting to dip their toes in. There’s a big misunderstanding that outsourcing and offshoring are just two different words for the same thing. 

The compact answer

 

Offshoring = giving work to a third party overseas, or moving functions of your own business function overseas

Outsourcing = giving work to a third party anywhere

 

Offshoring explained

The word ‘offshore’ has some negative connotations to it, especially in the world of finance. Don’t worry – when we talk about offshoring here, it has nothing to do with international banking. Offshoring refers to a business contracting work out to another country, or moving their own business abroad, in order to take advantage of favourable economic conditions.

Offshoring isn’t exclusive to product manufacturing. It is becoming more common for businesses to offshore processes to companies overseas where the cost of labour is lower. It’s all legit and there’s nothing to stop you doing so. 

Outsourcing explained

Outsourcing refers simply to the practice of hiring a third party or individual to carry out work that has historically been carried out in-house. You can outsource to a service provider anywhere, in order to utilisee greater expertise, or free up more time for you to focus on the work you love, that you’re best at. That service provider may be in the same country or even the same local area as you, or they may be overseas. So as you can see, offshoring is in essence outsourcing, but outsourcing isn’t always offshore

 

The decision to outsource should not be driven by the desire for cheap work

Where the confusion between offshoring and outsourcing is most detrimental is the perceived benefit of cheap labour – that the point of either is to simply deliver your existing services or products at a cheaper cost. Saving money is desirable, of course. Who doesn’t love to save money? But you may find that spending less money results in a higher cost to your relationships with clients. 

Our clients don’t outsource to us because they want us to do the more manual work at a cheaper rate. For starters, how would you go about deciding what your ‘cheaper’ work is?

Your compliance function is your core work – the work that needs to be done well and done consistently. It isn’t something you want just anyone to do. You certainly don’t want to compromise your high level reporting and life-changing advice for the sake of cheap rates either. 

Our clients work with us for our expertise in the industry of accounting, for our desire to make them more proactive in delivering value to their clients – but mostly because they have the right mindset. 

 

Outsourcing is driven by a growth mindset

It’s not about saving money, but it’s also not exclusive to the big firms either. We’ve worked with Sole Practitioners, two office practices, multi-partner practices and major international groups. We’ve found it’s not about the size, it’s about the attitude. The firms that see the most success are those who are able to look at their current offering and say “I want to be able to do more”. Those who don’t want to be stuck doing compliance only. Those who don’t want to see staff leave to do higher level work elsewhere. Those who want to be an integral part of their client’s business strategy instead of waiting on a monthly conversation. 

We wrote more about those kind of firms here.

 

Do you want to:

 

  • Do more of the work you love?
  • Improve the client experience by having the time to offer more value?
  • Free up space to train more of the team to deliver your high level work?
  • Have the processes in place to make more profit?

 

 

Ask yourself what it is you want to achieve, and then take a look at outsourcing journey and to see how you can start on the path to achieving it. 

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