Onshore Vs. Offshore Outsourcing: What Difference Does It Make?

What is Onshore Outsourcing?

Onshore outsourcing is sometimes called domestic outsourcing or simply onshoring. Companies offer remote jobs to other parts of the country.

Yes, there is a sense of patriotism when you keep the jobs domestic, but more importantly, onshore outsourcing can be a logistical dreamland for many tech companies.

What Does it Look Like?

The odds are that the company you own or work for does onshore outsourcing already without necessarily calling it that. If you hire a cleaning company rather than employing a janitor, that’s outsourcing.

A company in New York may hire a company in a lower-cost state to handle payroll. That’s outsourcing, too.

Hiring a web development company to redesign your website and manage SEO is also outsourcing.  

Pros of Onshore Outsourcing

Keeping your business operations close to home simplifies life, but onshore outsourcing can do much more.    

Security

Your data is your most valuable asset. Even if your clients and services aren’t a matter of national security, data breaches can have huge impacts. Not only is the personal information of your employees and clients at stake, but you could lose out on potentially millions of dollars and continued internal business dealings.

No pressure.

Working with other U.S. companies means they abide by the same domestic laws, so there’s no question of what security measures must be abided by.  

Communication

Onshoring can help you reach goals and accomplish tasks faster because communication is easily accessible. Just about every company uses some form of instant messaging for in-office and work-from-home employees. It also helps that there’s likely no language barrier and minimized cultural and time zone differences.

And sometimes, you just can’t beat in-person workshopping. Onshore outsourcing makes it achievable with minimal travel time and cost.

More Quality Control

With communication comes better quality control. We can all agree that hovering over employees and their work like a helicopter isn’t good for productivity, but quick check-ins between coworkers and management help keep things on track.

Plus, if you have an internal team, these onshore employees can integrate into the unit more efficiently—allowing you to maintain a cohesive crew.

Protection of Your Intellectual Property (IP)

The U.S. has stricter laws about I.P. than most other countries. Just like your data, your I.P. can be everything to your business. Whether it’s your product or branding, it’s what makes you identifiable and is truly the backbone of your company. Protecting it saves legal headaches and lets you keep what’s yours.

Corporate Social Responsibility

Businesses have been seen historically as the pillars of the community. They employ our friends and family and bring income to the neighborhood. These things, and any community care, are seen as corporate social responsibility.

Who’s to say the community doesn’t span across the country? Many onshore outsourced jobs go to people in more rural communities, where employment and income are more limited. Creating revenue for those communities is being socially responsible.  

Cons of Onshore Outsourcing

Of course, it’s not the perfect solution. Nothing really is.

While onshoring lessens the impact of global time zones, you still need to consider time differences across the U.S. Do you want to hire someone on the opposite coast and have them start their day at 6 am or end at 8 pm?

Also, consider the different costs of living across the country and in the U.S. in general. You’re paying much higher overhead costs for equipment and wages than you would for offshore outsourcing.

It’s more important to some companies than others but also consider your global reach. Keeping things limited to one country can reduce your potential. You can make a far-reaching impact with reliable and unique products and services, but having people where commerce happens is noteworthy.

What is Offshore Outsourcing?

Offshore is the “typical” outsourcing that comes to mind when most people hear “outsourcing. Offshore outsourcing is where companies hire out-of-country to fulfill their needs, generally through a third-party organization that operates in a much lower cost-of-living area.

The cross between on and offshore outsourcing is called nearshoring. Usually rarer, nearshoring happens in neighboring countries. In the U.S., this means Canada and Mexico.

Offshoring is popular and indeed necessary for tech giants such as Google and Amazon. They have offices across the globe, and each location has its niche, such as customer service, specific product development, production, or corporate headquarters.

Pros of Offshoring

There is a reason it’s been a regular practice for so many tech companies for so long. It takes more coordination and selection of what tasks you should outsource. Done correctly, it benefits your business’s bottom line.

More Cost Effective

Most other countries have significantly lower living costs than we do in the U.S. Even fair or high wages are typically going to be still lower. And, like onshore outsourcing, you save money on office space.

Many countries also want more international commerce, offering tax breaks and financial incentives to hire their citizens. Global trade means you have more capital to pour back into your business.

Increased Productivity

Spending less initially can lead to more hiring down the road. With more workers comes more productivity. Not only that, but the time differences mean more can be done “round the clock.”

Many companies utilize offshoring to implement the methodology of continuous workflow. It’s very similar to shift work—the first shift ends, then the second shift picks up where it left off. When the sun never sets on your work day, productivity can flow.

You have probably already been on the other end of the phone late at night with an outsourced call center. When your business involves urgent customer service, offshoring can fill that gap.

Larger Pool of Talent

In late 2022, the world’s population passed the 8 billion mark. Let’s briefly forgo a conversation on the sustainability of constant and rapid population growth and focus on how having so many Earth citizens means an enormous pool of talent to pull from.

In the U.S., we have incredible people on the cutting edge of technology development and management, as does the rest of the world. By not limiting your talent pool to a single country, you can tap into resources from across the globe.

Cons of Offshoring

Some might argue that keeping jobs domestic is the best argument against offshore outsourcing. The advantage of a global talent pool is the best defense against that.

However, there are other disadvantages to consider.

Communication Barriers

One obvious downside to offshoring is communication barriers. There’s a world in between you and your offshore resources. While the continuous workflow is a plus, instant communication between employees is challenging due to these massive time differences. In some cases, language barriers can get in the way.

Cultural Differences

Maintaining company culture is hard when you aren’t in the office — and significantly more so in different countries. While onshore and even nearshore outsourcing keeps the door of possibility open for in-person workshopping, offshoring can make it difficult.

We also need to talk about the cultures of different countries. How we view work and interpersonal relationships in the U.S. certainly isn’t standard worldwide. Management can start by encouraging employees to learn about the culture of their offshore counterparts and implementing a no-tolerance policy of respect.

Regulations and Legal Risk

We know that domestic onshoring keeps data and I.P. more secure. Therefore offshoring can put this at risk. Sharing resources in other countries with different laws can lead to data breaches and other legal issues.

Writing an air-tight contract with the third party providing the work overseas is possible. However, it does require a lot of work from your legal team.

The Main Difference

The key decision-making aspect of outsourcing is geographical boundaries. These boundaries lead to a lack of supervision, creating an inability to catch problems early. One of the most famous examples is Virgin Australia’s airline outsourcing its booking platform to Navitaire out of the U.S.

In 2010, one of Navitaire’s disk drives failed, crashing the entire system. Over 50,000 passengers were stranded as Virgin Australia no longer had any way to get them on a flight. Navitaire made the repairs to get the software back up—24 hours later.

The lesson is that outsourcing removes the need for control or micromanagement but can also add another difficulty level. Correcting any mistakes takes time and creates communication gaps.

Which One Is Right For Your Business?

It’s not a decision to make with a game of eenie-meenie-minie-moe. Consider what is important to you. Corporate social responsibility? Global reach? Profits?

Ask yourself if you have the resources to reasonably fight those geographical boundaries and language barriers to accomplish your goals. Is it worth the legal headaches?

At first glance, onshore outsourcing has fewer disadvantages and more advantages than offshore. But it’s ultimately up to you and what you decide your business is capable of.

When It’s Time for a New Technology Partner

Ready to improve your digital presence, know you need to outsource, but not sure who you can trust? At Eightfold, we take pride in being a true technology partner. Our US-based team works directly with our clients to realize your brand’s vision in today’s digital spaces.