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Offshoring 101: Common Terms You Need to Know

Offshoring 101: Common Terms You Need to Know

The practice popularly known as “offshoring” uses a lot of highly specific language that is unfamiliar to many business leaders. A lot of terms get thrown around when discussing offshoring, and very often people end up interchangeably using terms that contradict one another. 

This glossary attempts to clarify the specifics of the language and concepts associated with remote staffing solutions.

Offshoring

For starters, what is offshoring? Broadly, it describes the practice of transferring some aspect of your business to a geographic location that’s different from your own country. Offshoring is usually done to access a wider talent pool at a lower overhead cost to the business. 

In the remote staffing world, offshoring specifically refers to the practice of creating a dedicated team that is a part of your business despite the geographical difference. This is different from outsourcing labor offshore, as internal management is still given control over the offshore team. 

Outsourcing

To outsource work is to hire a third-party firm to fully manage and execute some vital aspect of your business. Historically, outsourcing has been done for a number of reasons, both related to labor cost, technical expertise and in-house capacity to perform work.

Outsourcing is fundamentally different from offshoring and remote staffing. When you outsource operations, you give control of that aspect of your operations over to external management who act under the aegis of their own company, not as an arm of your own organization. 

An outsourcing company’s customer is you, not your customers, and their internal strategy and profit motives are independent of your own. 

Offshore outsourcing

Outsourcing can be done locally or internationally. Offshore outsourcing specifically describes the practice of outsourcing tasks to a third-party company that operates in a different geographic region. 

Offshore outsourcing is the most hands-off option for management at HQ, but it comes with more risk — after all, your brand will be associated with the performance of that company. By its nature, offshore outsourcing involves moving operations to a region that is distant and distinct enough to warrant a full separation from the client company, versus nearshoring which stays closer to home. 

Both offshoring and offshore outsourcing have upsides and downsides for different companies. Exploring the nuances between the two is essential for making the right decision. 

Nearshoring

Nearshoring describes the practice of outsourcing some operations to a third-party that is located in a different geographic region—but one that’s closer to home. This allows companies to seek the benefits of outsourcing to more affordable areas—sometimes within the same region—without substantial time zone differences. 

Nearshoring also allows for easy travel between locations, which allows management to be more hands on with their partner. In many circles, it’s seen as the middle ground between in-house and full-scale offshore outsourcing. 

In Europe, places like Belarus, Hungary, and the Czech Republic are popular nearshoring locales, while Mexico is a go-to for U.S. firms.

Remote staffing

Remote staffing is an umbrella term for building a dedicated team in a location outside your in-house team’s location. It can describe hiring a team that is centralized in an offshore location or simply a remote team. 

Remote staffing decisions are made by management and human resources in-house, just like regular hiring. Remote staffing is not an aspect of offshore outsourcing. 

Remote staffing agency

As many startups discover too late, remote staffing can be incredibly difficult without an experienced partner organization in your offshore location. Most companies don’t have a built-in understanding of local customs, labor laws and international protections, or even communications best practices for managing offshore teams. Trying to build operational knowledge like this ad hoc while upscaling overseas is a recipe for disaster.

A remote staffing agency is a company that’s hired to assist in the process of locating and hiring relevant remote talent for your organization. They bring local expertise to the table, along with an understanding of how to build out a dedicated team of workers. Staffing agencies are a valuable asset for overseeing team onboarding, providing support and assistance to in-house management, and critical oversight of the remote team. 

Captive center

A captive center is a facility that is dedicated to housing your remote operations. In other words, it is your offshore company location. This property is operated, managed, and overseen by your company, not a third-party vendor or staffing agency. 

While maintaining a captive center may require more resources, it provides your team with a location that feels inclusive of the larger business and company culture. It also allows you to control more aspects of the job site, which helps to ensure greater team cohesion.

Dedicated team

A dedicated team of offshore employees entirely devoted to your business, not distributed among other companies in their staffing agency’s portfolio. This team works for you and you alone, and is folded into your company’s culture. A dedicated team usually works closely with in-house team members to build continuity across borders.

Hybrid team

A hybrid team includes both in-house and remote/offshore members working collaboratively. For example, a customer success team that operates over a 24-hour day may have locations in three or more countries, all sharing management and working together toward a common goal. 

Conclusion

While the nuances in these terms can create confusion, at the end of the day they represent a number of solutions meant to fit the needs of any business model. An experienced offshoring partner can make finding the right solution for your company easy by taking out the guesswork.

For companies that want to scale up on a budget, Bolton Remote offers the expert insight and oversight you need to inspire customer delight. 

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