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.
At AdvanceTrack, we offer both offshoring and outsourcing, and the model that works best for you depends on the stage you’re at as a firm, and how your processes work.
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
It is becoming more common for businesses to offshore processes to companies overseas
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.
The benefits of our offshoring model compared to others:
- You can scale with confidence: Build a team knowing that you can scale it, without the day to day IT and Training challenges
- It’s secure & quality is assured: It is managed and controlled by international Quality and Security Standards audited by BSI.
- You have holiday and sickness cover: You can save yourself time and HR hassles and never lose a day of production.
You can find out more about why we outsource to India here.
You can outsource to a service provider anywhere, in order to utilise greater expertise
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 utilise 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.
The benefits of outsourcing:
- Years of expertise – without having to take on a new employee and train them up to the level you require, you can give the work to a specialist with years of experience under their belt.
- You have more time to focus on more important areas – you won’t have to spend all your time and energy on the process you’re outsourcing, freeing you up to focus on the areas that need your attention.
- You can save on tech – you can rest assured your expert has the tech they need to do the job. If you’re not having to provide the infrastructure to support the work in-house, you can save on technology expenses.
- A difference in time zone may be advantageous – you may find outsourcing outside of your time zone works better. You can go to sleep and wake up to completed work!
You can read more about why we suggest outsourcing here.
Saving money is desirable, but 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.
The most successful 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 types of firms here.
Choose the engagement model that works best for you
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?
Great! All you need is a little help figuring out which model suits you best.
Scalable Delivery Model (Outsourcing)
- You have a standardised process
- You have fluctuating demand across the year
- You understand deadlines and will work with our teams to get the process right
- You understand that a team supports you
Dedicated Offshore Delivery (Offshoring)
- You don’t have a standardised approach
- You have steady workloads across the year
- Your service is quite bespoke to your clients
- You want to speak to the same team members every day
Ask yourself where your business is right now, and what you want to achieve. Then let us help you figure out which option is best for you. Take this short questionnaire to tell us about your outsourcing needs. It only takes a few minutes.