Outsourcing vs Offshoring

The advantages and disadvantages of outsourcing versus an independent expansion

1. Overview Outsourcing vs. Offshoring

2. Risks

3. Freeing up resources

4. Flexibility and Efficiency

5. Manage Employees

6. Costs

7. Control

8. Maximize Profitability

9. Initial Investment

10. Confidentiality

11. Knowledge of the Country

12. Innovation

There are quite many differences between outsourcing and independent expansion. An option could also be a mix of offshoring/outsourcing and an independent expansion.

1. Overview Outsourcing vs. Offshoring

1. Overview Outsourcing vs. Offshoring

You want to market or produce your goods to another country – however, you cannot decide which option to pick between outsourcing to a third partner or rather go on your own and do an independent expansion.

We have compared the two options and show based on different factors where are their strengths and weaknesses.

Outsourcing Offshoring (Independent Expansion)
Risks
Freeing Up Resources
Flexibility and Efficiency
Manage Employees
Costs
Control
Maximize profitability
Initial Investment
Confidentiality
Knowledge of the country
Innovation
Resistance to change
Outsourcing Offshoring (Independent Expansion)
Risks
Freeing Up Resources
Flexibility and Efficiency
Manage Employees
Costs
Control
Maximize profitability
Initial Investment
Confidentiality
Knowledge of the country
Innovation
Resistance to change

1. Overview Outsourcing vs. Offshoring

You want to market or produce your goods to another country – however, you cannot decide which option to pick between outsourcing to a third partner or rather go on your own and do an independent expansion.

We have compared the two options and show based on different factors where are their strengths and weaknesses.

2. Risks

Pro Outsourcing. By outsourcing your production or services, you will mitigate and share risks with external parties. It is probably the biggest advantage as you have no rents to pay, you are not responsible for machines or office furnishings, or employees.

You are only committed to the price you agreed on to pay to the partner. If you execute an expansion independently, you will be fully responsible and liable and the expenses are at the begin much higher; rents, employees, laws, export and import, travels, and many more things.

risks of outsourcing or expanding a business

2. Risks

risks of outsourcing or expanding a business

Pro Outsourcing. By outsourcing your production or services, you will mitigate and share risks with external parties. It is probably the biggest advantage as you have no rents to pay, you are not responsible for machines or office furnishings, or employees.

You are only committed to the price you agreed on to pay to the partner. If you execute an expansion independently, you will be fully responsible and liable and the expenses are at the begin much higher; rents, employees, laws, export and import, travels, and many more things.

3. Freeing Up Resources

resources availability outsourcing

Equal. You will be freeing up internal resources and using the resources for other purposes like on the company’s core competencies, and thus improving its competitive advantages by outsourcing time-consuming processes. Having said though, in an independent expansion.

3. Freeing Up Resources

resources availability outsourcing

Equal. You will be freeing up internal resources and using the resources for other purposes like on the company’s core competencies, and thus improving its competitive advantages by outsourcing time-consuming processes. Having said though, in an independent expansion.

4. Flexibility and Efficiency

Equal . Improving flexibility and efficiency by delegating responsibilities that are difficult to manage and control to external companies

4. Flexibility and Efficiency

Equal . Improving flexibility and efficiency by delegating responsibilities that are difficult to manage and control to external companies

5. Control and Manage Company

control company outsourcing

Pro Outsourcing. If you expand independently, you are responsible for your employees; set goals, observe them, solve disputes etc. In the outsourcing model, you “only” will have a binding contract with one supplier or partner which is then accountable for its employees.

Pro Independent Expansion. In the outsourcing model, the company will lose management control and the inability to control operations of activities or processes, whereas in the independent expansion, you will be fully in charge of all operations and you set your quality control and bring in your values.

5. Control and Manage Company

control company outsourcing

Pro Outsourcing. If you expand independently, you are responsible for your employees; set goals, observe them, solve disputes etc. In the outsourcing model, you “only” will have a binding contract with one supplier or partner which is then accountable for its employees.

Pro Independent Expansion. In the outsourcing model, the company will lose management control and the inability to control operations of activities or processes, whereas in the independent expansion, you will be fully in charge of all operations and you set your quality control and bring in your values.

you want to find out more about the advantages of an offshoring model?

Contact us and we will discuss your business case whether offshoring makes sense or not

Contact Us

you want to find out more about the advantages of an offshoring model?

Contact us and we will discuss your business case whether offshoring makes sense or not

Contact Us

6. Save Costs & Maximize Profitability

Pro Independent Expansion. In both options, you will be reducing operation, labour, and overhead costs.

However, in the outsourcing model, the company will lose management control and the inability to control operations of activities or processes, whereas in the independent expansion, you will be fully in charge of all operations and you set your quality control and bring in your values.

6. Save Costs & Maximize Profitability

Pro Independent Expansion. In both options, you will be reducing operation, labour, and overhead costs.

However, in the outsourcing model, the company will lose management control and the inability to control operations of activities or processes, whereas in the independent expansion, you will be fully in charge of all operations and you set your quality control and bring in your values.

7. Quality Standards

ensure quality standards

Pro Independent Expansion. There will be a lack of quality control, as outsourcing companies are often profit-driven rather than focused on doing the job exactly you want to have it. You will not have access to the daily operations and therefore not train those employees. In addition, Most EU standards are based on international ones, but Mexican standards often differ from international standards. If you do an independent expansion, you train and control your employees directly.

7. Quality Standards

ensure quality standards

Pro Independent Expansion. There will be a lack of quality control, as outsourcing companies are often profit-driven rather than focused on doing the job exactly you want to have it. You will not have access to the daily operations and therefore not train those employees. In addition, Most EU standards are based on international ones, but Mexican standards often differ from international standards. If you do an independent expansion, you train and control your employees directly.

8. Initial Investment

Pro Outsourcing. In independent outsourcing, you a lot of fixed costs as you have to buy new machines or transfer them from your country, rent warehouses, pay an attorney, found the company, and many other things. Thus, the initial investment is quite high compared to outsourcing where you have not high costs.

8. Initial Investment

Pro Outsourcing. In independent outsourcing, you a lot of fixed costs as you have to buy new machines or transfer them from your country, rent warehouses, pay an attorney, found the company, and many other things. Thus, the initial investment is quite high compared to outsourcing where you have not high costs.

9. Confidentiality

Pro Independent Expansion. There is a risk of losing sensitive data and the loss of confidentiality by outsourcing activities or processes to external parties, whereas there will be a much lower risk in the independent expansion as it is your firm.

9. Confidentiality

Pro Independent Expansion. There is a risk of losing sensitive data and the loss of confidentiality by outsourcing activities or processes to external parties, whereas there will be a much lower risk in the independent expansion as it is your firm.

10. Innovation

Pro Independent Expansion. In the long run, this could become key when you do an independent expansion as Mexico has a population of over 125 million inhabitants and many talented people. We can create a competitive advantage by developing your employees and attracting them to your organization and developing your products or services to the next higher level. In the outsourcing option, you will not have any of those advantages as the employees do not belong to your company and you can not develop them.

drive innovation outsourcing

10. Innovation

drive innovation outsourcing

Pro Independent Expansion. In the long run, this could become key when you do an independent expansion as Mexico has a population of over 125 million inhabitants and many talented people. We can create a competitive advantage by developing your employees and attracting them to your organization and developing your products or services to the next higher level. In the outsourcing option, you will not have any of those advantages as the employees do not belong to your company and you can not develop them.

11. Knowledge of the country

knowledge of the country

Equal. One of the critical success factors is to have partners and to know the country, culture, laws and many other things. You think now that you do not have any knowledge of the country, however, you have US – Consulting-Expansion.com and we help you as a strong partner and network in Mexico to do the whole execution!

11. Knowledge of the country

knowledge of the country

Equal. One of the critical success factors is to have partners and to know the country, culture, laws and many other things. You think now that you do not have any knowledge of the country, however, you have US – Consulting-Expansion.com and we help you as a strong partner and network in Mexico to do the whole execution!

12. Resistance to Change

Equal. One of the critical success factors is to have partners and to know the country, culture, laws and many other things. You think now that you do not have any knowledge of the country, however, you have US – Consulting-Expansion.com and we help you as a strong partner and network in Mexico to do the whole execution!

12. Resistance to Change

Equal. One of the critical success factors is to have partners and to know the country, culture, laws and many other things. You think now that you do not have any knowledge of the country, however, you have US – Consulting-Expansion.com and we help you as a strong partner and network in Mexico to do the whole execution!