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Offshoring and Outsourcing
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With the economy weakening, the reports of the widespread offshoring and outsourcing have attracted much public attention. Although all workers have long been exposed to competition, trends such as falling communication costs, the rise of Internet commerce, and other technological advances have made a much wider spectrum of jobs vulnerable to relocation.

But how is offshoring distinguished from outsourcing?

Outsourcing is a term that refers to the practice of one company hiring another to perform tasks that used to be done in-house. E.g. an automaker used to make its own tires, but now buys them from another company that specializes in tire production. It does not necessarily indicate nationality—functions can be outsourced to either domestic or foreign workers.

Offshoring refers to substituting foreign workers for domestic labor. When a company finds replacements for current employees outside the country, it may hire its own employees abroad (offshoring) or it may outsource the work to another company operating abroad. Take the familiar example of a U.S. company that decides to replace U.S.-based computer programmers with programmers in India.

Sources: EPI Offshoring Guide, Wikipedia
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  • JustinGreene01

    Off shoring and Outsourcing has been loosely used in most discourses. They are often understood to be the same. I liked the delineations that you gave in terms of the definitions of such words.

    An interesting trend to note is the outsourcing of key business processes like outsourcing payrolll. There is an emergence of payroll companies domestically and internationally like Payroll (Colorado) firms and other accounting companies. In house departments are replaced by another company that has the expertise and software that can efficiently organize company information and other data. This is very beneficial since it saves the owner time that he can use in expanding company operations.

  • This explains well. Great post Sergey. This helps those that do not have any idea on what is outsourcing vs offshoring.

    Phil

  • It's been a long time that I was not able to visit this site. I'm back and hope I could still post here.

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