The 4 Models of Outsourcing: Which One Is For You?
With the Covid-19 lockdowns forcing people to stay at home, some businesses are forced to turn toward outsourcing to keep operations running. Without any clear indication of when the epidemic will completely pass and when everything will reopen, uncertainties surrounding businesses, employment and well-being will persist. For business owners, the challenge is not only losing business and money, but also keeping or finding valuable employees.
Four Models of Outsourcing
Fortunately, outsourcing some business processes presents a part of the solution. To understand how it works, we need to first understand the four models of outsourcing:
- Insourcing – Using a team of experts in the related field within your company to handle the specific tasks
- Outsourcing – Delegating the specific tasks to a third-party company and/or consulting firm
- Onshoring – Using local or in-country companies to fulfill your outsourcing needs
- Offshoring – Turning toward the foreign or overseas-based companies to fulfill your outsourcing needs
These four models are categorized as onshore insourcing, onshore outsourcing, offshore insourcing, and offshore outsourcing. Any of these models are simpler to execute if we understand the differences in each concept.
Key Differences in the Four Models
Insourcing
This model mainly refers to hiring employees to do certain jobs. Having regular in-company employees has its own advantages and disadvantages. They key advantages include being able to supervise and closely monitor the tasks, their performances, personal interactions, the communication gaps and response times to specific issues. Meanwhile, the disadvantages include the need to hire specialist managers to supervise and run the team; even multiple teams run by team leaders, for bigger projects. This usually leads to higher overhead costs such as additional costs in office space, equipment, and benefits, among others.
Outsourcing
Basically, this model means employing an external company to do the work. Outsourcing can come in many forms, performing specific business processes such as administration, finance, and marketing. Outsourcing is particularly useful especially if you are a small company or startup, when you are unable to manage or perform a process due to a lack of expertise in that field or the time. Delegating the task to a service means that company is now responsible for the managing and hiring the required workforce, saving you the time, trouble, and expense.
Onshoring
In its simplest form, onshoring is hiring a local company to do the task for you. Onshore insourcing means your company has hired regular employees within your home country to do the job. This applies to hiring a local workforce at the different branches of your office, as long as these branches are in the same country. In contrast, onshore outsourcing means outsourcing your task to a third party that is also in the same country as your company.
Offshoring
This model refers to the delegation of tasks to establishments outside of the country. In offshore insourcing, you are employing an inhouse workforce, that is, regular-status employees situated at a different country. With offshore outsourcing, the tasks are delegated to a third party located overseas.
Which is the Best Model for Your Business?
Of course, insourcing is the most common form of workforce model that businesses apply. However, in the current lockdown situation where many workers are forced to stay at home, insourcing trades off many of its advantages such as personal communication and supervision.
In such cases, it might be worth your time browsing your outsourcing options. Many outsourcing companies in emerging economies such as the Philippines offer these services for affordable labor costs, saving you tons of money. In turn, your business will be able to create more avenues for outsourcing and income for even more people. The trade off is that the time zone difference could delay service delivery times for as little as half a day compared with the immediate response of an insourced team; but during a lockdown where little or no services are delivered, offshore outsourcing could be an excellent option.
It is vital to understand the best model for your business, because shifting from an onshore insourced workforce to an offshore outsourced workforce will take time to train and bring the team up to speed on their responsibilities. If that time and effort can justify the money saved, productivity, efficiency, and your peace of mind, offshore outsourcing might be the difference between the life and death for your business.
Considerations of Choosing an Outsourcing Model
When deciding on the right outsourcing model for your business, consider some of these factors:
Costs. When outsourcing can get the job done for you at lower cost, this should be your priority. If the taxes in one country cancel the money saved, move on to the next location that offers a number of government and tax incentives like the Philippines to outsourcing companies.
Workforce. It is important to know if the outsourced workforce has the skills to get the job done. While lower costs do not inherently define a lower-quality workforce, sometimes, you might just get what you pay for: a cheap and unskilled workforce. Do your due diligence and interviews among several service providers to find the best employees. Many outsourcing service providers offer affordable and flexible solutions with expertise and a deep track record.
Time. If a fast response time is imperative to your business, then insourcing should be your first choice. If time is flexible and if delivery within a reasonable time frame suits your needs just fine, go for outsourcing, whether onshore or offshore. Many outsourcing companies offer time zone advantages to make their workers available in three eight-hour shifts to provide 24-hour service all over the world.
Quality. Quality control under close supervision is one of the main benefits of onshore insourcing. However, if you can find a reliable, experienced and trustworthy company to outsource your tasks to, you can be assured that the job will be delivered. If you are unsure about the quality of a specific provider, move on to the next.
Custom Solutions for Your Assurance
The Philippines is consistently a premier destination for offshore outsourcing service providers such as Yempo. We can address most concerns about offshore outsourcing by customizing the solution based on your business needs. To learn more how we can help your company embark on offshore outsourcing, contact us today.