Offshoring vs Outsourcing vs Subcontracting

Your business has a problem. You have a task that your current company doesn’t have the skill, abilities, or time to complete.

You could hire more employees at your base of operations, but that may not be ideal for several reasons. 

Maybe it’s not a large enough task to justify hiring a dedicated employee. Maybe it’s a short-term task that requires a short-term solution. Or perhaps you don’t have the necessary resources to commit to an in-house solution.

You have a few options in these situations: offshoring, outsourcing, or subcontracting.

But in common parlance, these terms are often used interchangeably. So what exactly is the difference between them. What are their pros and cons? And which is right for your business?

Let’s look at three common options: offshoring, outsourcing, and subcontracting.

What Is Offshoring? 

Offshoring has been around for many years and has become more popular with the rise of globalization.
The term “offshoring” refers to the transfer of an organization’s business processes to another country. This means either hiring or sending an in-house position abroad. Offshoring can include manufacturing, customer service, accounting, or anything that doesn’t need to be performed domestically.

Offshoring Pros:

The costs of living and operation vary wildly from country to country. The United States isn’t the most expensive country, sitting at number 20 in cost of living, but there are plenty of countries where labor and materials are far more inexpensive.
Offshoring can be used to lower production costs and increase profit margins. It can also reduce or eliminate the need for expensive equipment or land-based infrastructure in the host country. India and China, in particular, have low labor prices.

The other pro is that if you locate a team in an opposite time zone to your own, you can provide 24-hour services far more quickly. So instead of a graveyard shift, you have employees who are awake and ready. 

Offshoring Cons:

One of the biggest cons of offshoring is operating in different time zones. Depending on how dramatic the difference is, different time zones can mean severe communication breakdowns or problems during an emergency. 

Additionally, if the two teams ever have a meeting, one or both will have to come in on off-hours. As a result, any communication will experience a delay.

The other con is the difficulty of managing and collaborating with a group of employees with language and cultural considerations that differ from yours. 

What Is Outsourcing?

Outsourcing permanently contracts out a business process to another party, often an external service provider. 

Outsourcing can be either inbound or outbound. Inbound outsourcing involves transferring work from inside the company to outside providers, and outbound outsourcing involves moving work from external providers to inside the company.

Outsourcing is different from offshoring because the work is handled by another company rather than a branch of your company located elsewhere. 

Outsourcing Pros:

There are many benefits of outsourcing. One advantage is that it allows organizations to focus on their core competencies while delegating other tasks to specialists who are better suited for them. 

Outsourcing can be a good option for small companies that need to focus on their core business competencies and don’t have the resources or expertise to do specific tasks themselves. It can also be used for more complex tasks that require particular skill sets unavailable in-house.

Organizations can also save money by outsourcing specific functions like payroll processing, customer service, and data entry.

Outsourcing Cons:

With outsourcing, you lose some of the control you have with in-house work. You are putting your business into someone else’s hands. So, while this can result in higher quality work, you have less assurance than the workers you’ve personally vetted. 

You’re also at the mercy of their company problems. If they have many workers quit or need to shut down, you’ll have to make up the shortfall.

What Is Subcontracting?

Subcontracting is similar to outsourcing in that you hire a third party to perform a task. However, the difference is that it isn’t permanent. So, subcontractors work only for the time specified in their contract on specific jobs.

If a business needs a specific task performed once, they generally hire a subcontractor—either an individual or a company—to perform it. For example, if a business needs a website built but decides to maintain and update the website themselves, they would hire a subcontractor to make the website.

Subcontracting Pros:

Subcontracting is becoming a popular solution for companies. It is a cost-effective option that allows companies to focus on what they do best while having someone else complete tasks that otherwise drain time and resources.

Some of the benefits of subcontracting are similar to outsourcing in that the company can focus on what they do best and get quality work done at a lower cost. You also aren’t locked into a permanent relationship with another company because of the nature of a contract.

Subcontracting Cons:

The main disadvantage of subcontracting is that it can be challenging to control the quality of work. Subcontractors are only as accountable for their work as the contract says, and it’s possible they may not have the same level of expertise as you.

In many cases, you won’t be able to supervise your subcontractors or monitor their work, giving you little control over the quality of their work. 

Conversely, if you are happy with their work, you may not be able to retain them if you need them in the future since you’re beholden to their schedule.

Which Is Right for Your Business?

Offshoring, outsourcing, and subcontracting all provide ways to get around the age-old problem of so many things to do and so little time. 

Offshoring is the best option for your business if you have a task you need to be done regularly that could be more cost-effectively taken care of elsewhere. On the other hand, outsourcing is effective for tasks you want to be overseen and handled by another company entirely. And subcontracting is best when you have specific jobs that you need to take care of once.

If you need help figuring out the best solution for your business, Confianz can help! Our team is right there with you every step of the way, and we can provide personalized consultation. Confianz Global® provides the very best in offshore app development services. We deliver end-to-end solutions that fits both your requirements and your budget. As offshore app developers we are well versed in various platforms, including iOS, Android, and Windows.

Choosing an offshore software outsourcing company can be risky, but when you outsource through Confianz Global, you can rest assured that you are getting the same great quality products and service that you’ve come to expect. So call us today!