Knowledge Base Article
Understanding outsourcing, offshoring, nearshoring, staff augmentation, and the whole remote alphabet soup

So, you have decided to increase your productivity by outsourcing. But now, you’d like to be more conscious of which type of outsourcing could work best for you.

Good news! In this post, Coderslink is breaking down outsourcing for you. We hope this will be useful in your decision-making process.

Let’s start from the top.

Outsourcing

In short, outsourcing is the process of delegating any task to an external source. It can be local or international, a group or an individual. As long as this source is not an internal part of your organization (e.g., an employee), you are outsourcing.

Although there may be different opinions, in reality, outsourcing encompasses anything from a substitute teacher to Antonio’s factory in Mexico making doors for Volkswagen’s cars.

Outsourcing offers a variety of alternatives that help you save money, time, or even face. However scary it might sound, bringing a foreign agent to help you with your internal processes (imagine PWC auditing a company), can help you focus on things that really matter for the original purpose of your business.

Outsourcing ensures that your resources will be used accordingly to reach your goals.

It takes a little of humility to accept mentioned approach. You can’t, and shouldn’t, do everything yourself. Maybe your expenses will raise but, if you plan accordingly, so will your profits.

Onshoring

This is one way to outsource. Onshoring implies that the external party helping you, your “outsource”, is in the same country as your headquarters.

So, you hire an external professional, located within the same country in which you are, to work for you.
For example, Apple hiring KPMG USA to manage their financial books.


Benefits:
  1. Similar or identical working culture.
  2. No language barrier.
  3. Similar or identical time zones
  4. Easier to see or visit each other.
  5. Familiarity.
Things to consider:
  1. Small to none cost reduction in outsourced processes.

Nearshoring

Here’s another form of outsourcing. This is when you hire an external professional that is in a neighboring country to yours, but never in the same territory. You can hire a single person or a complete group of specialists. This could be directly with an individual or organization, or through agencies like CodersLink that simplify the finding, vetting and onboarding of your specialists.

For example, if AT&T hired a call center located in Mexico, for customer support, or if a freelance developer in Japan hired one freelance developer in China to help her with one task.

Benefits.

  1. Similar or identical time zones
  2. Bigger cost reduction.
  3. Practically zero liability.
  4. Easy to visit.

Things to consider.

  1. Different working culture.
  2. Possibility of communication struggles.
  3. Infrastructure.


Offshoring

This word has gained a bad reputation in the last few years. Mainly, because of people having shady offshore bank accounts or the exploitation issue with some multinationals.

In reality, offshoring means taking one or more of your processes and getting them done in a distant country.

For example, Volkswagen hiring a Brazilian factory to manufacture engine parts.

Benefits.

  1. Can dramatically reduce costs.
  2. Potential 24-hour work cycle.
  3. Not dealing with many, possibly any, legalities.

Things to consider.

  1. Communication styles
  2. Work ethic and structure.
  3. KPIs and measures of success.
  4. Difference in time zone
  5. Infrastructure

Staff Augmentation

Imagine that your company finds itself in the middle of a big project, and you happen to need SQL experts in-house, but only through the duration of the project. This is when you should think about using Staff Augmentation.

A specialized agency that provides talent can solve this. They’ll also take care of all the legalities and back office procedures. By the end of the project, everything goes back to normal, except that you’ll have one more victory in your pocket.

Think of it as upgrading your “developers’ army” with a legion of “skilled mercenaries,” just for this one battle. This skilled people can come from any corner of the world.

However, by bringing new people in-house, time can become an expensive resource, especially, when it comes to training and bringing them up to speed.

To optimize, having manuals and systems will decrease your training times.

Staff augmentation is recommended for the short-term. For the long-term, it would be better to hire someone directly.

Making sense of all this “shoring” and staff augmentation.

We could think of outsourcing as music, and onshoring, nearshoring, offshoring, and staff augmentation as types of music.

The “shorings” imply remote work, while staff augmentation requires in-house work.

Well what about Remote Work?

In essence, it means working from a distant location. It’s important to note that both “remote” and “work” have their own weight in the equation. If people are in a remote location, but not working, the purpose gets lost.

We’d invite you to re-think of it as “Remote Productivity,” people can be very busy but not be productive.

Remote work can happen in any of the scenarios mentioned above, and even with your “in-house” team. Times are changing, and the trend is moving towards people not having to be physically in one location or workplace to produce results.

Focus on what really matters

We all know the ending of the story about the entrepreneur that wanted to do it all. However, most of us need to get to a breaking point to realize that we only have two hands and so many hours in a day.

After such realization, the first rational step tends to be getting employees, which can be an arduous process itself. A great way to shorten the time required to get someone onboard is by using an outsourcing strategy.

Of course, it is vital to map out your company’s growth path and have a clear vision of the steps it’ll take to get there. After you’ve done this, you can decide which ones to outsource.

Outsourcing is an excellent tool for retaining clients. Maybe there is this one project that will open the door for your company with a big client, but your business is not ready to take on every aspect of it.

Consider this when outsourcing


  1. Outsource mechanical, non-substantial things. They require less training or context, and so your “secrets” are always safe.
  1. If you offshore things, you will be dealing with a different vision of the world. Always research before deciding.
  1. Take time to state the obvious. Assumptions are usually behind misunderstandings. Save some time and bitter moments: state the obvious.
  1. Invest some time in learning how to give instructions. It is much like sitting down — you might not think much of it, except when your back hurts.
  1. Research about payment methods and be clear about the whole money process with the person on the other side.
  1. Ultimately, this is a trust exchange. So try to create a space where trust is the main ingredient. Honor deals, hold people accountable to their agreements, and never be afraid to say goodbye at an early stage or at any point if need be.

To summarize

Outsourcing is the delegation of any task required by your company to an outside resource — hence, outsource. This source can be in the same location as you, in another country, contracted by a freelancing platform, or through an agency, but is never a full part of the structure of your organization.

Offshoring, nearshoring, onshoring, and staff augmentation are to outsourcing, what Karate is to martial arts. Where outsourcing encompasses many things, including those three.

  • Offshoring is to delegate tasks to a person or organization in a distant country from the one in which your headquarters are. By default, it implies remote work.
  • Nearshoring is to delegate tasks to a person or organization in a country not so far from yours. Typically, it’s a neighboring country. By default, it implies remote work.
  • Onshoring is to delegate tasks to a person or organization in the same country as your headquarters. It doesn’t necessarily imply remote work. It could be PWC auditing your company.

Staff augmentation is when you need a group of people with a specific skill set that you, or your company, don’t have or are not particularly good at. It implies bringing people in-house, from anywhere in the world.

This staff will then contribute to the completion of a particular project laid out for them, and once finished, leave.

Remote work is working from any location different to what would be considered the “workplace.” Again, we’d invite you to think of it as “remote productivity.”

Remote work is not necessarily outsourcing. You could have some employees doing home office, that’d be remote work.

It’s easier than it sounds

There are thousands of platforms in the world that can give you access to this world. Ask around, read reviews, look for other sources, so you can take a well-informed decision.

You can get rid of tasks that just drain you or rob you from valuable time. Outsourcing will give you this freedom, allow you to grow in the direction you intend, and boost productivity for you and your organization.

We hope this post was helpful for you. If you have any questions, leave it below and we’ll answer ASAP.

Thank you for reading.