A large company has multiple business functions, including:
It may also be spread across different regions.
Managing the entire company singlehandedly can affect its overall productivity. As a result, these companies usually get some of their work done indirectly to save resources, cost, and time.
These kinds of business activities fall into two categories:
In offshoring, businesses send a part of their company to some offshore location.
This allows the company to operate within a region without being concerned about and taxes and tariffs.
In outsourcing, businesses hand over the contract of their work to a third party.
This lets the work be performed by a specialized team and saves the company the burden of dealing with something outside their niche.
Outsourcing | Offshoring |
Advantages | |
Specialized skillset | Low cost |
Cost-efficient services | Global talent pool |
Flexibility of labour | Better communication with the local community |
Disadvantages | |
Increased reliance on third party | Transfer of jobs to other countries |
Lack of in-house knowledge/communication | Geopolitical risks |
Misaligned interests of client and vendor | Language/communication barrier |
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