What is the Difference Between Outsourcing and Offshoring?

Nice post, but I believe we are a little hypocritical when we think of this as 'outsourcing'. It's a two way street. If our companies want to sell products and services to other countries, they would want the same in return. They want to buy iPhones and we want their cheap labor. Either we are for free market capitalism or we aren't. There is nothing in between.

Thanks for sharing the post. Outstanding article. The difference between outsourcing and offshoring services are explained exceptionally well in this article.

I think the U.S. is severely behind on education; grades 3-8 in particular are lacking. Simple things like geography, basic biology, history (of other countries, not just the U.S.), math, music and art are all covered more consistently in other countries.

Is that why outsourcing is occurring? Maybe, but it certainly might be a good idea to improve education from the bottom up, rather than trying treating a symptom such as outsourcing in the IT sector.

Hope this helps:

A company functions like you building a house. You want to get a quality product for the minimum cost (value). You might have the know how and resources to do the framing, but are you also the best person to do the electrical and plumbing? If not, you contract that work to someone else (outsource).

If you want custom windows built for the house and the house is large enough, you might have that work done offshore (large enough because for you to factor in the freight cost to ship back to US, if the freight equals savings from cheap labor might as well outsource in the US). If I'm specing the windows and telling you how to build them in the low cost geo, then that is offshoring. If I hire you in the low cost geo to spec and build based on my needs, that is offshore outsourcing.

Outsourcing is making the poor even more poor, hurting the economy of that particular state, and downright wrong. The masterminds behind allowing the outsourcing are driven by greed. Unemployment rises from outsourcing and the foreigners definitely aren't going to be spending money in the U.S. But when foreigners are in the U.S., they send money back to their countries. The U.S. is becoming a third world country.

I think offshoring has become a trend. I'm pretty sure that companies can outsource inside of the country and still reduce costs.

It might seem more profitable to offshore to far away countries that will work for less. But I think that communicating with and managing employees so far away would be difficult. I think it would actually make running the company harder.

And is profit everything? Shouldn't we worry about unemployment that results from offshoring? So many Americans have lost their jobs. Stuff might be cheaper to buy but we can't buy it if we don't have a job, right?

@simrin-- I don't think we are behind other countries in education or expertise. It's just that many developing countries --or emerging markets I think they are called-- can provide the same expertise for cheaper. Offshoring or outsourcing is just about profit.

What I have gathered from this information is that offshoring is harder on our economy than outsourcing, right? Because we can outsource and still have our citizens employed by the company. But offshoring will most likely lead to outsourcing as well, in which case, foreigners might make up most of the employees.

I understand if a company is oursourcing and offshoring because natural resources and labor are cheaper somewhere else. But why would you want to outsource knowledge processing? Are we running behind other countries when it comes to education?