Talking technology – outsourcing and offshoring

Although people often use the terms outsourcing and offshoring interchangeably, they mean different things. We explain all

The finance profession has benefited from outsourcing since long before the term even existed. Accountants in practice offer their client services on this basis, and they were among the first professions to use IT to do so, by providing payroll as a bureau service.

IT has been fundamental in the evolution of outsourcing. The concept became well known in the late 1980s when many technology companies outsourced their customer support functions – with the help of IT. Now, with its support, organisations use external specialists to handle various non-core business functions including accounting, customer support, facilities management, finance, human resources and IT itself – to name but a few.

Although people often use the terms outsourcing and offshoring interchangeably, they mean different things. Outsourcing is the transfer of organisational functions to a third party, but this can also be called offshoring when that third party is located in another country. Just to complicate things, offshoring can also be used to describe the process of transferring work to another country, but keeping it within the organisation instead of using a third party. To provide clarity, the term ‘offshore outsourcing’ can be used to describe the process of outsourcing to a third party located in a foreign country.

Less confusingly, these various terms of reference are unified by common underlying motives: the need to cut operational costs and reduce complexity – though outsourcing, offshoring and offshore outsourcing can also deliver significant operational efficiencies. The business advantages of being able to get work done overnight, during what is the day in another time zone, is helping to popularise the offshoring of services from data analysis to secretarial support.

Outsourcing and offshoring can be emotive subjects for some members of the finance profession. After all, when an organisation outsources its entire finance function, or replaces multiple national finance departments with an international shared services centre, fewer highly skilled accountants are needed. When accounting functions or jobs are offshored from Europe or the US to China or India, it seems clear which nations’ finance professionals have most to gain.

Change rarely benefits everyone affected and these trends are no exception. They may be changing the shape of the finance profession, forcing some experienced accountants beyond their comfort zone, but they are also creating opportunities for part and newly-qualified ACCAs across the world – so you may as well exploit them. 

 

"Outsourcing and offshoring can be emotive subjects for some members of the finance profession. After all, when an organisation outsources its entire finance function, or replaces multiple national finance departments with an international shared services centre, fewer highly skilled accountants are needed"