Is global sourcing the same as outsourcing?

In the world of recruitment and workforce management, there’s a wealth of terminology used that can mean different things to different people, which understandably leads to some confusion. In fact, we often find ourselves being asked “is global sourcing the same as outsourcing?”. Put simply, the answer is no, but (just to add another dose of complexity) global sourcing can be outsourced.

By means of explanation, here’s a breakdown of the two.

Global Sourcing

In an increasingly connected world, companies today are turning attentions to international markets and emerging economies to source and export products or services. As a result, the term ‘global sourcing’ has become more prevalent in business strategies.

This term is often used to describe the sourcing of manufactured foods and raw materials from across borders. However, ‘global sourcing’ is increasingly being used from a talent perspective, particularly the global sourcing of skilled contingent labour.

As most procurement and HR teams are already fully aware, global sourcing strategies can often lead to the lowering of labour costs and increasing access to skills. However, with global, regional and local compliance and legislative nuances, this approach can often place further pressures on already over-stretched HR and procurement teams.

The risks of missing any small detail in global sourcing talent strategies are potentially significant. But tapping into international markets has the potential to be highly lucrative for many businesses and thus can’t be ignored.

Outsourcing

The very definition of outsourcing is in its name: it’s the outsourcing of an entire function or aspects of a function to a third party. In the context of the workforce, outsourcing comes in two different versions.

• Business Process Outsourcing (BPO) / Statement of Work (SoW): where a third party takes complete responsibility and management of a function, or element of a function. An example would be a production line, where a third-party is responsible for sourcing all workers, decides which are employed and then manages them. In this example a function is wholly outsourced. A full-service SOW solution will also fall under this bracket.
• Managed Service Programs (MSP) / Recruitment Process Outsourcing (RPO):where a third party takes responsibility for managing the process and certain aspects of a function’s recruitment. For example, supplier contract management and payment to suppliers, amongst many others. The crucial difference is that the client makes the decision on which workers to hire, and then is responsible for the management of the worker once selected – the client is much more involved and has more control even though much of the sourcing process has been outsourced. MSP’s and RPO’s are, by far, more prevalent and applicable within large organisations.

Outsourcing — whether in the form of RPO, MSP, SOW, or BPO — has become increasingly attractive as the world of work has evolved to become more flexible and workforce agility more desirable. This is especially true for businesses that are growing and consequently need seasonal or project-specific increases in resources or specialist skills that are either difficult to obtain or expensive. An outsourced strategy could include global sourcing tactics, which could be managed by the external partner rather than in-house.

So, is global sourcing the same as outsourcing?

Hopefully the above descriptions clarify the nuances between outsourcing and global sourcing and why they are different but connected. However, what I would like to stress is why outsourcing is so beneficial to recruitment and workforce management on a global scale:

• Reducing costs: This is arguably one of the most widely-recognised benefits of an outsourced solution. Perhaps more importantly, though, outsourcing talent and contingent management to an external expert can help identify significant internal resource optimization opportunities (and thus savings).
• Streamline global strategies: An outsource solution is beneficial when it comes to managing large and complex global strategies that involve a high volume of workers that are engaged across countries under varying employment structures.
• Reduce the impact on over-stretched in-house teams: Crucially, an outsourced workforce management model can reduce the burden on procurement and HR teams, while also ensuring workers are engaged compliantly across the globe.
• Expert guidance: In a constantly changing world of work, leaning on the experience of a workforce solutions partner will help your business attract and engage the best people – even for difficult to fill roles.

So, if you’re looking at global sourcing options, outsourcing may be your best option.

Want to know how an outsourced recruitment model can benefit your business? Read some of our customer success stories here, or get in touch with the team today to discuss your contingent workforce needs.