What is Offshoring?

Offshoring, outsourcing, farshoring… All these terms seemed like the same thing to me. Finally, I decided I should actually do some research and find out what offshoring actually meant.

So what is offshoring? The Dictionary.com definition is “the practice of moving employees or certain business activities to foreign countries as a way to lower costs, avoid taxes, etc.” Offshoring began in the 1970s when companies needed to establish factories in other countries to reduce overhead.

The practice of offshoring has grown to include IT services and processes beyond just manufacturing because companies are seeing its benefits. According to a Deloitte’s 2016 Global Outsourcing Survey, (in this study outsourcing and offshoring are synonymous because they surveyed only global outsourcing which is offshoring), 59% of companies cited the primary reason for offshoring. The other top reasons were it allowed them to focus on the key aspects of their business and helped relieve the workload. Offshoring is also a hot topic in politics as some people criticize the transfer of jobs to other countries, while others view it as a vehicle to stimulate economies.

What’s the difference between offshoring and outsourcing? Offshoring refers to a geographic move of the work a company is doing while outsourcing refers to a company giving work to a third-party. Companies could achieve offshoring by outsourcing to a third-party in another country but neither is dependent on the other.