Outsourcing vs. Offshoring – Cost, Quality & Efficiency

Written by Nicholas Hastings, CEO and Founder, hammerjack

In the COVID-driven climate of uncertainty gripping business communities around the world, cost efficiency is at the forefront of every business owner’s mind. Flexibility in terms of business structure and the employment of your team have become key factors in determining the health and survival prospects of the company moving forward. This is more keenly felt in high cost domestic environments such as Australia, where employing a full suite, full-time onshore workforce can drive overheads up to potentially unsustainable levels. This can ring especially true at a time when revenues are fluctuating wildly across so many industries.

In such situations the relaying of tasks to third party providers outside of your business can often become the most cost effective way of accomplishing your goals, minimizing the amount of staff on a full-time payroll to those that are absolutely essential. There are different ways that these actors can participate in your business. We believe it’s essential for every owner to understand the varying levels of third party skill providers that are available, so let’s clarify some of the points of difference.

Outsourcing – Think of the Big Picture

Outsourcing is the broad term for the use of a third party for any function of your business. You need to get a job accomplished, either as a one-off or on a regular basis, and you get an individual or team from outside of your regular staff to complete the task. It is unspecific in terms of whether that skill provider is domestic or international, one person or more. It simply refers to the movement of work from within your full-time team to a supplier external to your business.

There is a broad sense of cost efficiency that is related to outsourcing on any level, as it is inherently more outcomes based and often operates on a pay-per-task or hour model. Business owners use outsourcing to maintain the essential functions of their business, and keep the operation ticking, whilst trimming the fat on their costs. As revenues fluctuate you have the flexibility of being able to engage or disengage according to your bottom line and needs, giving your business a potential sense of agility.

There can, however, correspondingly be a loss of the control that your in-house structures provide, such as ensuring a certain level of quality from the outset. Different suppliers will perform to dramatically different standards, and differentiating the workers that best suit you from those that don’t can be a stressful experience. As the liaison for many business’ outsourcing solutions, our team at hammerjack have become specialists at ensuring that the outsourcing of your business’ functions does not equate to the loss of performance.

To outsource a function or task outside of your business also does not, in and of itself, mean that you have found the best-cost solution, especially when outsourcing domestically. In high-cost environments such as Australia, there is still always the potential for expenses to swell quickly with any adjustments or changes often accompanied by swift price hikes. The businesses you’re dealing with domestically are encountering many of the same high wage rates and costs that you are, passing the expense around between you. In order to find a more efficient cost solution, potentially it’s worth turning an eye offshore.

Offshoring – Let’s Get More Specific

Offshoring can be considered a form of the more broadly defined outsourcing, but now we’re talking more specifically about using global assets to form a part of your workforce, whether temporarily for a particular task or period of time, or on a more permanent basis. Generally speaking, the cost efficiency debate between outsourcing domestically and offshoring is relatively one-sided in terms of the pure numbers. The Australian domestic workforce is typically more expensive as compared to the overseas capital available to Australian business owners. It is fair to say that the absolute lowest-cost solution available for the performance of an enormous range of tasks is far more likely to be available overseas.

There is, however, a natural hesitation from many business owners with regards to engaging with international skill providers and it stems from two main areas of uncertainty. Firstly there are the aforementioned concerns over a drop in both quality and quality control that accompany the use of any out-of-house asset, and this is amplified when that asset is internationally based. There is an extraordinarily large array of different solutions overseas and it can be overwhelming finding the one that matches the quality you need. This is one of the most fundamentally important outcomes for our specialist hammerjack team when matching international workers with any of our clients. We’re looking to save costs, but never at the expense of the quality of the work.

The second apprehension with regards to lower cost international work usually involves potential communication issues. Working with a domestic provider is naturally less likely to encounter issues such as those of language barriers, or time zones. These issues are often more prevalent when businesses engage directly with the offshore workforce, and try to run the entire integration operation themselves. Foreseeing and addressing these concerns on behalf of the client is a key function of intermediary businesses, such as our team at hammerjack, who supply tailored offshore solutions to Australian businesses so as to mitigate a number of these issues before they rear their head. In addition we have an onshore account management team to oversee the work, a large expense but a model that ensures quality, consistent outcomes for our customers.

The use of an experienced international workforce and staffing supplier will naturally instill a greater confidence that the team member/s you’re engaging with will be the most appropriate for your business needs. The intermediary also acts as a communication and integration link between the offshore assets and the existing workforce, implementing tried and tested methods to ensure that the business continues to perform optimally.

If the Shoe Fits, Then Wear It

Ultimately, it’s not necessarily a binary decision in terms of what may be more suitable for your business – outsourcing domestically or offshoring. The more fundamental point is that there are potential cost efficiencies that you might be able to find in terms of your workforce and business operations, and those savings might ultimately make the difference in the long term in terms of your company’s survival. Utilizing the wealth of experience and structures of staffing providers such as our team at hammerjack can simplify and streamline the process, preventing the onset of a number of additional complications, as I’ve mentioned.

With the right outsourced assets in place alongside your full-time workforce, you can endeavor to keep your costs low whilst ensuring that your business continues to deliver on it’s product, satisfy your customers and remain profitable moving into the future.