Oct 2019


Offshoring versus Outsourcing? Why the confusion remains

By: Odyssey Outsourcing
Tags: Offshoring, Outsourcing, turnover, virtual teams

Our CEO was visiting a client in Canberra the other day, and discussion invariably ended up mentioning the aggressive pursuit by offshore labour providers in the Philippines.  The question then had to be asked: why are some firms considering the Philippines labour hire solutions, while other firms are knocking them back and working with Outsourcing offerings. The response was: Offshoring isn’t a quick fix.

It seems there has been some confusion in the last few years about the difference between offshoring and outsourcing, and some of it the confusion is being generated by service providers offering offshoring in order to obfuscate the offerings.

The TPB, in their exposure draft TPB(PN) D38/2017 Outsourcing, offshoring and the Code of Professional Conduct, noted from the Oxford 2015 dictionary as follows:

Outsource To obtain (goods or a service) by contract from an outside supplier

Offshoring The practice of basing some of a company’s processes or services overseas

Offshore outsourcing involves sending work overseas to a provider, who provides the goods or services. Offshore outsourcing has been around for quite a while, and been on the Australian parliament’s mind for over a decade.

Offshore outsourcing has been the gold standard for Australian accountants sending compliance work overseas for the past 15 years.

More recently, offshoring has been confused with outsourcing. So we’ve listed some things you might hear:

  1. Offshoring will work for any type of firm!
  2. You can offshore anything!
  3. Outsourcing is suddenly becoming more relevant!
  4. Offshoring will allow you to scale your firm as much as you like!
  5. According to a recent study (conducted by the firm selling you the service)….
  6. Offshoring needs little investment. It just works.
  7. A distributed workforce can get things done better!
  8. Our Offshoring model is different and very unique!
  9. If you don’t hurry, then your firm will end up behind your competitors!

Here are some interesting comments we found online:

Virtual teams are worse than I thought: For years I’ve been warning people that, in spite of the advent of so much technology that allows co-workers to communicate with one another remotely, building and leading virtual teams remains a serious challenge. But after having been involved in a virtual team myself for the past three years, I now realize I was wrong; Virtual teams are even harder than I had thought.

Virtual teams have communication breakdowns. Without addressing the underlying struggles caused by offshoring, a training programme runs the risk of only addressing the surface communication problems of technology, leadership and meeting skills and even language and culture issues, which can arguably be seen as ‘masking’ deeper employee concerns and struggles

Certainly there are plenty of pros and cons available online re offshored Virtual remote teams:

  • Lower bandwidth
  • Extra overhead
  • Harder to track effort and time
  • Investors, owners, clients might not like it
  • Harder to create culture
  • Requires new skills & behaviours
  • High turnover can be a problem
  • Things get lost in translation
  • Remote communication is the norm
  • Hidden costs are likely e.g. bringing your team down to Australia
  • Remote staff have a life as well
  • Cultural communication differences can create confusion
  • The time difference can be bad as well as good

We’re watching Australian accountants work through the offshoring versus outsourcing issue, and in our opinion the decision on the best business model isn’t a clear cut decision.

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