It has become increasingly difficult for software companies in developed countries to recruit and retain skilled employees. However, talent-rich nations like India, the Philippines, and Romania have many well-educated and qualified candidates. The question comes down to offshoring vs outsourcing, and how either model can help you leverage this expertise and act as a competitive advantage for all organisations.
When looking for qualified candidates, tech leaders have had to start searching outside their local IT market. Organisations are now refocusing their attention on their core activities by outsourcing or offshoring their software development as opposed to spending a disruptive amount of time on recruitment.
We know that businesses can upskill and speed up scaling through offshoring and outsourcing by breaking free from traditional hiring strategies, but how are they different? Although these words are commonly understood as hiring someone to do your work for you, they mean much more.
How outsourcing and offshoring differ
It’s common for people to confuse offshoring and outsourcing. Organisations often see them as the same thing, but their business models are fundamentally different. The process of outsourcing involves assigning non-core, peripheral activities or operations to an external entity. Basically, a company hires a third party to perform a specific task. In software development this means hiring a third party to source, hire, and manage a development team abroad. Often this team works on separate projects to the one based ‘at home’.
In contrast, offshoring means relocating the entire firm to another country instead of its primary location. Offshoring involves shifting operations and offices instead of just moving operations. It typically also involves hiring a dedicated team that works solely for you, unlike outsourcing where you’re one of many clients. The right offshoring partner can do everything for you from setting up offices abroad to handling legal and administrative activities, but most importantly they can establish a screening process to find the very best people.
Knowing that these two models are quite different, the question remains: If we compare offshoring vs outsourcing, which provides more benefits?
The pros and cons of both models
Outsourcing and offshoring were both designed to overcome issues constraining a business's operations and by leveraging affordable and specialised services from abroad. These models allow organisations to benefit from the economies of scale by operating in larger international markets.This advantage can be hugely beneficial to the software development industry. They especially are required to frequently privot in order to find the right people to develop and maintain their IT infrastructure.
Outsourcing allows software development organisations to concentrate on their core activities by subcontracting the rest. This can lead to the elimination of infrastructure and administration overhead, resulting in significant recruitment and operational cost-cutting.
However, this model, which leverages cheaper labour, is known for putting cost savings before finding the best developers. So, when analysing the benefits of offshoring vs outsourcing for the software development industry you must consider which one can provide you with that. While offshoring also provides access to cheaper labour costs and specialised skills, it also typically involves working with the right local partners to give your organisation greater control, in hiring and retaining the best engineers.
Offshoring not only provides organisations with cost-effective solutions but a scalable one as well. Offshoring offers organisations a unique solution: long-term, worldwide software development.
And offshoring gives a company more control over its core activities. This is something outsourcing has limitations on. Ultimately, you are in the driver's seat. You decide who is hired and who is not. Offshoring is not so much about saving money as it’s about gaining access to exceptional talent.
Offshoring vs outsourcing: choosing the right model
Once you weigh the benefits that each model brings, you see that there is a clear winner in the offshoring vs outsourcing competition. For short-term projects, outsourcing is typically a reliable option. Offshoring, however, is ideal for companies looking to build their talent teams through a deep talent pool without losing control of their processes and company culture.
Organisations can build incredible development teams. Although there will be challenges, working with your team will be rewarding. Using an offshore team directly allows you to create an efficient workflow without compromising quality. To get the most out of offshore development, you need the guidance and assistance of experts in the field and experienced technology professionals. Therefore, choosing the right offshore development partner is crucial.
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