Onshore vs Offshore Outsourcing

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Let’s explore the differences and the pro’s and con’s…

What is an Onshore company?

Onshore companies are the most popular types of companies in the World. An Onshore company can be described as a legal entity that is incorporated in a country to operate a business within that specific border.

Onshore companies are also defined as jurisdictions that have developed economies and strong financial markets. The United Kingdom, Netherlands and The United States are examples of onshore jurisdictions.

Advantages of Onshore Companies:

Onshore companies offer a set of advantages that are compelling to most business people.

Timezone

Timezone differences are not a problem which require solving. No more midnight meetings, as all employees operate in the same timezone.

Cultural Differences

As most of the activities performed by onshore companies are within their own borders of incorporation, researching and adapting to new customs and cultures is not of concern.

Location

As the employees are all within the same geographical Country, this allows for lower cost face to face meetings. Managing a team in the same Country or even office is far easier than that of managing a remote team.

Communication

Language competency is probably the biggest advantage for an onshore company. All employees talk the same language and for the majority, the language skill set is native.

Disadvantages of Onshore Companies:

But the can also come with some disadvantages.

Employees

As onshore companies operate within developed countries, the cost of hiring employees costs more than developing countries due to higher salary expectations from qualified candidates. The competition to attract top talent is fierce and the recruitment process can be time consuming without the guarantee of finding the ideal candidate for the job at hand.

Costs

The costs for onshore outsourcing is always higher, as these are tied to the economic environment of the client’s country, which means an onshore service provider’s charges are higher than an offshore service provider.

What is an Offshore Company?

An offshore company is a legal entity incorporated in a jurisdiction outside of an investor’s native Country.

In simple terms, an offshore company indicates nothing more than a company established in another country.

An offshore company is mainly prohibited from conducting any type of business within the country of incorporation.

A common misconception of offshore companies is that they are solely a tool for tax evasion or concealing money from the government. Offshore companies are in fact legal and governed by the jurisdiction and regulations where the company is incorporated.

Advantages of Offshore Companies

As each jurisdiction provides various financial benefits for different types of businesses, there are some common benefits across most offshore jurisdictions.

Costs

The costs of engaging an offshore managed service provider is comparatively cheaper than hiring skilled onshore professionals. The labour costs offshore tend to be cheaper whilst maintaining a high quality standard. 

Equipement

Outsourcing IT to an offshore managed service provider means the managed service provider is responsible for ensuring their staff are armed with all of the tools and technology to perform their roles.

Specialised Professionals

Outsourcing to an offshore service provider enables the client to take advantage of a larger pool of skilled personnel who have the necessary training and certification to provide the level of service required.

Business Focus

Outsourcing an IT function / service allows the client to focus on their core business without the worry of IT performing.

Disadvantages of an Offshore Company

Communication

As skilled as the professionals are in another language, local dialect, accents and language could cause confusion and misunderstanding of the requirements at hand.

Team Bonding

As a result of geographical locations, it is more difficult to bond with an offshore team due to the distance, timezone, language and cultural differences.

Onshore vs Offshore Outsourcing: Which is better?

This question can only be answered by the business. Every business has different business drivers and goals. Each type of operation comes with both its advantages and disadvantages.

The recommendation here would be to list out your business drivers and goals to determine which option would suit your business needs. Remember, there is the option for a hybrid model, where some elements of your IT are supported Offshore and others Onshore.
Contact us at info@avanait.co.uk and we’d be happy to work with you on your journey to determine the most suitable model to achieve your goals.

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