Skip to content
American ExpressAmerican ExpressAmerican ExpressAmerican ExpressAmerican Express
  • Personal Accounts

    • Account Summary
    • View Statement
    • Manage Account
    • Make a Payment
    • Manage Pre-Authorized Payment
    • Add Someone to Your Account

    Business Accounts

    • Business Account Summary
    • American Express @Work
    • Merchant Services

    Online Services

    • Register for Online Services
    • Activate Your Card
    • American Express App
    • Manage Account Alerts
    • Sign Up for Email Offers
    • Online-Only Statements

    Other Services

    • American Express Gift Cards
    • Support 24/7
    • Welcome Centre
    CanadaChange Country
    English
    • Français
  • Personal Cards

    • View All Cards
    • Credit Cards
    • Why American Express?

    Small Business Cards

    • View Business Cards
    • Interested in a Card?
    • Refer a Business Owner

    Corporate Cards

    • Corporate Cards
    • Supplier Payment Solutions

    Quick Links

    • Travel Cards
    • Cash Back Credit Cards
    • Platinum Cards
    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards
    CanadaChange Country
    English
    • Français
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection
    • Travel Support

    Business Travel

    • Global Business Travel Solutions
    • Meetings & Events

    Other Travel Services

    • Travelers Cheques
    CanadaChange Country
    English
    • Français
  • Travel

    • Travel Insurance
    • Air Trip Insurance

    Personal

    • Account Protector Ultimate
    • Identity Defence

    Other

    • Review Your Coverage
    • Submit an Online Claim
    CanadaChange Country
    English
    • Français
  • Membership Rewards® Program

    • Explore Membership Rewards
    • Redeem Points
    • Fixed Points Travel Program
    • About Membership Rewards

    Other Reward Programs

    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards

    American Express Invites®

    • Front Of The Line®, Entertainment, Shopping & Dining Offers
    • Sign Up for Entertainment e-Updates

    Refer a Friend

    • Refer a Friend. Get Rewarded
    CanadaChange Country
    English
    • Français
  • Merchants

    • Merchant Services
    • Accept the Card
    • Manage Merchant Account
    • Contact Us
    • FAQs

    Corporations

    • Corporate Cards
    • Supplier Payment Solutions
    • Cardmember Resources
    • Program Administrator Resources
    • Global Business Travel Solutions

    Small Business

    • Small Business Solutions
    • View all Cards
    • Business Trends & Insights

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers
    CanadaChange Country
    English
    • Français
  • Contact Us
  • Login
      • Account Summary
      • View Statement
      • Manage Account
      • Make a Payment
      • Manage Pre-Authorized Payment
      • Add Someone to Your Account
      • Business Account Summary
      • American Express @Work
      • Merchant Services
      • Register for Online Services
      • Activate Your Card
      • American Express App
      • Manage Account Alerts
      • Sign Up for Email Offers
      • Online-Only Statements
      • American Express Gift Cards
      • Support 24/7
      • Welcome Centre
      • View All Cards
      • Credit Cards
      • Why American Express?
      • View Business Cards
      • Interested in a Card?
      • Refer a Business Owner
      • Corporate Cards
      • Supplier Payment Solutions
      • Travel Cards
      • Cash Back Credit Cards
      • Platinum Cards
      • AIR MILES®* Credit Cards
      • Aeroplan®* Rewards Cards
      • Book Travel Online
      • Book Fine Hotels & Resorts
      • Book The Hotel Collection
      • Travel Support
      • Global Business Travel Solutions
      • Meetings & Events
      • Travelers Cheques
      • Travel Insurance
      • Air Trip Insurance
      • Account Protector Ultimate
      • Identity Defence
      • Review Your Coverage
      • Submit an Online Claim
      • Explore Membership Rewards
      • Redeem Points
      • Fixed Points Travel Program
      • About Membership Rewards
      • AIR MILES®* Credit Cards
      • Aeroplan®* Rewards Cards
      • Front Of The Line®, Entertainment, Shopping & Dining Offers
      • Sign Up for Entertainment e-Updates
      • Refer a Friend. Get Rewarded
      • Merchant Services
      • Accept the Card
      • Manage Merchant Account
      • Contact Us
      • FAQs
      • Corporate Cards
      • Supplier Payment Solutions
      • Cardmember Resources
      • Program Administrator Resources
      • Global Business Travel Solutions
      • Small Business Solutions
      • View all Cards
      • Business Trends & Insights
      • Home
      • Issuers
      • Acquirers
      • Service Providers
      • Developers
  • Contact Us
CanadaChange Country
English
  • Français
  • Personal Accounts

    • Account Summary
    • View Statement
    • Manage Account
    • Make a Payment
    • Manage Pre-Authorized Payment
    • Add Someone to Your Account

    Business Accounts

    • Business Account Summary
    • American Express @Work
    • Merchant Services

    Online Services

    • Register for Online Services
    • Activate Your Card
    • American Express App
    • Manage Account Alerts
    • Sign Up for Email Offers
    • Online-Only Statements

    Other Services

    • American Express Gift Cards
    • Support 24/7
    • Welcome Centre
  • Personal Cards

    • View All Cards
    • Credit Cards
    • Why American Express?

    Small Business Cards

    • View Business Cards
    • Interested in a Card?
    • Refer a Business Owner

    Corporate Cards

    • Corporate Cards
    • Supplier Payment Solutions

    Quick Links

    • Travel Cards
    • Cash Back Credit Cards
    • Platinum Cards
    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards
  • Online Travel

    • Book Travel Online
    • Book Fine Hotels & Resorts
    • Book The Hotel Collection
    • Travel Support

    Business Travel

    • Global Business Travel Solutions
    • Meetings & Events

    Other Travel Services

    • Travelers Cheques
  • Travel

    • Travel Insurance
    • Air Trip Insurance

    Personal

    • Account Protector Ultimate
    • Identity Defence

    Other

    • Review Your Coverage
    • Submit an Online Claim
  • Membership Rewards® Program

    • Explore Membership Rewards
    • Redeem Points
    • Fixed Points Travel Program
    • About Membership Rewards

    Other Reward Programs

    • AIR MILES®* Credit Cards
    • Aeroplan®* Rewards Cards

    American Express Invites®

    • Front Of The Line®, Entertainment, Shopping & Dining Offers
    • Sign Up for Entertainment e-Updates

    Refer a Friend

    • Refer a Friend. Get Rewarded
  • Merchants

    • Merchant Services
    • Accept the Card
    • Manage Merchant Account
    • Contact Us
    • FAQs

    Corporations

    • Corporate Cards
    • Supplier Payment Solutions
    • Cardmember Resources
    • Program Administrator Resources
    • Global Business Travel Solutions

    Small Business

    • Small Business Solutions
    • View all Cards
    • Business Trends & Insights

    Global Network

    • Home
    • Issuers
    • Acquirers
    • Service Providers
    • Developers

CanadaChange Country
English
  • Français
Business Cards
Small to Medium
American Express® Business Gold Rewards Card
Business Platinum Card® from American Express
Marriott Bonvoy™ Business American Express® Card
American Express® AIR MILES® for Business Card
American Express® AIR MILES® Gold Business Card
American Express Business Edge™ Card
View all Business Cards
Large/Corporate
American Express® Corporate Card
American Express® Corporate Gold Card
Corporate Platinum Card® from American Express
American Express® AeroplanPlus®* Corporate Card
American Express® AeroplanPlus®* Corporate Platinum Card
View All Corporate Cards
Supplier Payment Solutions
American Express vPayment
American Express Corporate Purchasing Card
American Express Business Travel Account
American Express Buyer Initiated Payments
American Express Corporate Meeting Card
View all
Trends & Insights
Trends & Insights
Insights and Inspiration to Help Grow Your Business
Managing Money
Cash Flow
Financing
Creating Efficiencies
Suppliers
Inventory Management
Productivity
Automation
Planning for Growth
Strategy
People
Business Expansion
Risks and Controls
Innovation
Industry Thought Leadership
Industry Insights
Oil & Gas
Construction
Thought Leadership
Request Info
  • Trends and Insights
  • Creating Efficiencies
Business Class

August 11, 2020

Potential Advantages of Offshore Outsourcing in Business

Potential Advantages of Offshore Outsourcing in Business

Twitter Icon
Facebook Icon
LinkedIn Icon
American Express

Summary

Cost benefits are driving companies to adopt offshoring, outsourcing, or a combination of the two in order to stay competitive.

Twitter Icon
Facebook Icon
LinkedIn Icon

More and more companies may be considering outsourcing and offshoring their work as a potential way to reduce costs and streamline their operations. Outsourcing is when a company hires an outside organization to do specific jobs or provide services. Offshoring means a business arranges to get its work done in a different country, usually to take advantage of cost savings.

Many companies may be considering one or both—or a combination of the two, known as offshore outsourcing—in order to help stay competitive, especially in global markets.

Outsourcing vs. offshoring: How are they different?

Although the terms are often used interchangeably, there are some key differences between outsourcing and offshoring:

Outsourcing

This involves contracting out work to a third party, which may or may not be located overseas.

It's possible to outsource to a vendor without sending the work offshore. For example, a North American company may hire a local accounting firm to manage its bookkeeping instead of having its own staff members do the work in-house.

Offshoring

This is when a business moves some of its operations and employees overseas, often to less developed countries with inexpensive labor and resources.

It's possible for a business to set up offshore operations without outsourcing those processes to a third party. For example, a company may move its call centers to India to serve its North American customers.

Pros and cons of offshoring and outsourcing

There are advantages and disadvantages businesses should consider when it comes to outsourcing and offshoring.

Potential advantages of offshoring:

  • Lowers labor costs. One of the potential advantages of offshoring is that businesses could save money by hiring foreign workers to do the same work for less money than it may cost in North America.
  • Establishes new markets. Setting up an offshore presence may enable a company to broaden its customer base to other countries.
  • Enhanced knowledge of overseas markets. Foreign employees may offer a better understanding of the regional trends, markets, business risks and cultural norms in their country than North American employees
  • Alternate tax and regulatory benefits. Several countries offer tax breaks and financial incentives to entice foreign companies.

Potential advantages of outsourcing:

  • Frees up in-house resources. By shifting some of the workload to an outside source, businesses can focus more on growth strategies.
  • Lowers operational costs. One of the potential advantages of outsourcing is that contracting out work could lower overhead expenses and the need for additional in-house employees.
  • Provides access to outside expertise. Outsourcing offers companies the opportunity to hire a vendor that specializes in a skill their company lacks.
  • Faster service. A specialized offsite vendor may have the talent and resources to complete a task faster and more efficiently.

Potential disadvantages of offshoring:

  • Regulatory differences. There are also foreign laws and risks that may impede standard North American business practices.
  • Time zones. Working with overseas employees may mean having to make calls at inconvenient times in order to reach them during their normal business hours.
  • Exchange rates. The highs and lows of currency valuation can make a significant dent in overseas transactions and may offset savings.

Potential disadvantages of outsourcing:

  • Security risks. Entrusting an outside firm with sensitive company information may increase the chances of a security breach.
  • Loss of control. Delegating responsibilities to an offsite vendor can make it difficult to monitor progress and maintain quality control.
  • Lack of institutional knowledge. A company's interests may not align with those of an external organization, which lacks the firm's in-house insights.
  • Intellectual property concerns. Sharing ideas and data with a third party can make it difficult to protect intellectual property.

What is offshore outsourcing?

One of the ways to experience the potential advantages of outsourcing and offshoring is to combine the two, which could result in even greater cost savings. Offshore outsourcing means delegating certain tasks to a third party in an overseas location. There are several potential benefits:

  • Cost savings. By combining offshoring and outsourcing, a company could potentially save more money if able to take advantage of lower foreign costs and less overhead.
  • Territorial knowledge. Having the ability to leverage a foreign workforce familiar with its own country and markets could be useful.
  • Global competitiveness. As more North American companies expand operations overseas, offshore outsourcing could help them remain viable in an increasingly competitive global marketplace.

Current and future effects of offshore outsourcing

Market demands for lower labor costs will likely drive the continued growth of offshore outsourcing. More and more companies are also implementing this strategy so they can turn their attention to their core business and better serve their shareholders.

Offshore outsourcing has been prevalent in the Canadian IT industry, with many firms outsourcing software development, network operations and other IT services.

 

 

This article is intended for general informational purposes only and does not constitute legal advice or an opinion on any issue. It should not be regarded as comprehensive or a substitute for professional advice.

Twitter Icon
Facebook Icon
LinkedIn Icon
Want to Dig Deeper?

American Express Cards

  • Personal Cards
  • Credit Cards
  • Small Business Cards
  • Corporate Cards
  • American Express Gift Cards
  • Add Someone to Your Account

More Products & Services

  • Membership Rewards® Program
  • American Express App
  • Insurance Home
  • Book Travel Online
  • Merchant Services
  • Accept the Card

Important Links

  • Form & Document Centre
  • Online Services
  • Global Assist
  • Shop Confidently
  • See Merchants Near You
  • Refer a Friend

Company Information

  • About American Express
  • Careers
  • Contact Us
  • Sign Up for Email Offers
  • Frequently Asked Questions
  • Moving Abroad?
    • Personal Cards
    • Credit Cards
    • Small Business Cards
    • Corporate Cards
    • American Express Gift Cards
    • Add Someone to Your Account
    • Membership Rewards® Program
    • American Express App
    • Insurance Home
    • Book Travel Online
    • Merchant Services
    • Accept the Card
    • Form & Document Centre
    • Online Services
    • Global Assist
    • Shop Confidently
    • See Merchants Near You
    • Refer a Friend
    • About American Express
    • Careers
    • Contact Us
    • Sign Up for Email Offers
    • Frequently Asked Questions
    • Moving Abroad?

American Express
CanadaChange country
English
  • Français
  • Facebook
  • Connect with Amex on Instagram
  • Tweet your questions to @AskAmex
  • YouTube

  • Trademarks
  • Terms & Conditions of Use
  • Updated Online Privacy Statement (01/2018)
  • Complaint Handling
  • Codes of Conduct & Commitments
  • Amex Bank of Canada Prime Rate
  • Security Alerts
  • Accessibility Policy
  • Accessibility Plan
  • Cardmember Agreements

Amex Bank of Canada, P.O. Box 3204, Station F, Toronto, ON M1W 3W7

Copyright © 2021 American Express Company