Nowadays, it can be easy to confuse some of the terms that float around when discussing things like information technology outsourcing, or offshore software development. Two of the key terms often used are “outsourcing” and “offshore.” (To make things extra confusing, these two terms are often used together; surely you’ve heard of “offshore outsourcing?”) To clarify these two terms, let’s first look at their basic definitions:

Outsourcing – Outsourcing is – to put it plain and simply – subcontracting. When you hear someone use the phrase “IT outsourcing services,” they are referring to merely subcontracting IT work to a third party. Outsourcing, contrary to popular belief, does not necessarily refer to sending work overseas. A company in Minneapolis could “outsource” work to a company in St. Paul. One of the most common examples of outsourcing is telephone sales and call center services. While many companies used to employ their own in-house call centers, these services are now usually subcontracted through a third party company.

Offshore – Offshore is a pretty simple term: It merely refers to any company, service, or client that is based overseas. Offshore outsourcing means that you are subcontracting work to overseas companies. If a company based in Texas has subcontracted a company in India to develop their website or provide their call center services, that Texas company has outsourced offshore. Offshore outsourcing does not, however, refer to hiring employees from overseas to work at your company in-house.

Now that you understand the difference between these two phrases, let’s look at the benefits of outsourcing within the U.S. versus outsourcing overseas.

Outsourcing Offshore – Outsourcing offshore is one of the best strategies for a company to get work done without breaking the bank; as in, offshore outsourcing allows companies to accomplish necessary tasks (such as creating efficient websites or call centers) without having to hire new talent in-house for things like IT application development, product development and rich internet application development. Offshore outsourcing also allows companies to access an entirely new talent pool, and allows access to brilliant new technology that is not yet prevalent in the United States.

Outsourcing Domestically – Domestic outsourcing usually happens for two reasons: Either a company is subcontracting another company for work they cannot do in-house, or, a company is seeking cheap call center services. Typically, outsourcing offshore is more lucrative. Not only is it usually far more cost efficient, but it also allows companies to access quality professionals and technologies that are not widely found in the U.S.