Quick Summary:
Outsourcing vs Offshore Development Center - In this article, we will explore the differences between traditional outsourcing and offshore development center (ODC) models. We will examine the benefits and drawbacks of each approach and help you determine which option is best for your business.
Demand for specialists is extending nationwide. Probably that’s why companies are reconsidering their hiring strategies and not shying away from outsourcing specialists for giving a competitive edge to their business.
However, there is constant confusion between two terms in this market - Traditional outsourcing vs offshore development center (as to which is better and why).
Although both these terms are not novel to businesses, most of us don’t even have a crystal clear apprehension of both these terms.
Simply put, the main difference between outsourcing and offshore development is that traditional Outsourcing involves collaborating with a third party to handle data, while Offshore Development Center (ODC) establishes a remote IT team to extend on-premises teams. ODC is suitable for startups and large organizations.
In this article, you will learn about these terms, how they are essential for your business, and which one is better for the ultimate growth of your business.
Key Listing
- Traditional outsourcing and Offshore Development Center (ODC) are two different business models that offer unique benefits and drawbacks depending on the needs of your business.
- Traditional outsourcing involves collaborating with a third-party to handle data, while ODC establishes a remote IT team to extend on-premises teams.
- ODC can be more cost-effective in the long run, making it a suitable option for startups and large organizations looking to establish a dedicated remote team for ongoing development and maintenance.
- Both traditional outsourcing and ODC can be suitable for large organizations, depending on their specific needs. It's important to evaluate the benefits and drawbacks of each approach and determine which option is best for your business.
What is Traditional Outsourcing?
It is a business practice where services are farmed out to a third party. A third party takes care of specific tasks, operations, or services for the company that wants the services. Their responsibilities include arranging their systems to work, completing tasks in a given time, and delivering quality results as expected by the company wanting services.
According to Wikipedia: Outsourcing refers to a contract where a company engages another company to manage a specific project or task that could be handled internally, within the organization. This may involve the relocation of resources and staff from one company to the other.
Software Development Outsourcing is no longer limited to cost savings - it has evolved as a strategic tool to capitalize on the world’s evolution into a better tech-savvy place.
The outsourcing market has evolved, exploded, and there are no signs of slowing down. This crazy boom has been so lucrative for the companies, who have genuinely leveraged the potential of outsourcing.
Outsourcing has led these companies to:
- Strengthen focus on core business activities
- Improved efficiencies in the organizational processes
- Minimum time to market
- Cost Containment
- Extraordinary Quality
Outsourcing has the potential to bring excellent benefits to your business. However, there are specific challenges that come along with this process.
Let’s explore it as we break down all about traditional outsourcing that you need to know.
- Generally outsourced services are:
- Operational Outsourcing
- Professional Outsourcing
- Process Outsourcing
- IT Outsourcing
- Project Outsourcing
- Manufacturing Outsourcing
Outsourcing is also known as contracting out or business process outsourcing.
Why Do Companies Outsource?
Every company that is outsourcing has its reasons to do so. We are mentioning some primary ones that almost every company lures for from outsourcing.
1. For Enhanced Business Efficiency
No matter what sort of outsourcing your company is doing, it must bring in the potential to improve the efficiency of the business. No company would expect the process to drag out longer, consuming more valuable employee time.
2. For Experiencing Complete Availablity
Remote teams in India or the Philippines are amongst the best bet to get affordable units for high-quality work deliveries. However, it doesn’t have to be outside your country always. You can outsource your team from your own country. In the end, their availability matters, not where you are hiring them from.
3. For Enjoying High-Quality Work
The possibility of your outsourced team already having tons of clients with a load of work is higher. So, we recommend you check the quality of work delivered regularly (once they are outsourced).
4. For Linking Directly to the Bottom Line
An outsourced company should be able to deliver the quality of work that grows your business. Make sure the services boost the sales and profits of your business. After all, that’s one of the primary reasons for most companies.
5. For Fulfilling Constant Work Delivery
The chances of getting constant work delivery from the outsourced team are more than your existing (in-house) team, as the continuous challenges of your team are mostly shifting on a daily basis.
Types of Outsourcing
Outsourcing can be divided into three major categories:
1. Onshore outsourcing
This typically involves sending tasks to a company located in the same country or a region nearby. Some commonly experienced benefits of this outsourcing are:
- Easy to control
- Easily accessible
- Speak the same language
- Shares the same timezone
2. Nearshore Outsourcing
When your company hires companies in countries with the same time zones is known as nearshore outsourcing. The benefits of this outsourcing type are:
- No timezone difference
- Higher effectiveness
- Similarities in culture/language
- Cost-saving
3. Offshore Outsourcing
The outsourced party belongs to some other country to performs the business tasks assigned. Usually, the focus of Offshore Outsourcing is to attain the most cost-effective services for the business.
Advantages of Outsourcing
As we mentioned, there are different reasons why outsourcing is opted for by companies. Here are some recognized benefits of outsourcing:
- Enhanced Focus on Business Activities
The primary objective of outsourcing is to focus on core business activities. Outsourcing a team can give you sufficient time to focus on building your business, focus on the strengths, and allow enough time for your team member to concentrate on core business activities.
- Higher Efficiency
Outsourcing companies generally specialized in a particular service that you have hired them for. Hence, the work delivered is more effective, quality, and efficient in all terms, as specialized professionals take care of it.
- Improved Reach
Outsourcing helps you get access to those services, abilities, and capabilities that are not otherwise available or affordable.
- Greater Competitive Edge
With this process, you can leverage the skills and knowledge that can help you be more competitive and win the market.
- Limited Cost