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Generally, offshoring is used to describe a business’s (or a government’s) decision to replace domestically supplied service functions with imported services produced offshore.

This definition focuses on a business’s sourcing decision – should it produce the services internally, source them domestically, or source them from offshore? The imported services can include a wide range of functions, such as computer programming, payroll and accounting, and customer call centres.

When a business replaces services it had produced internally (or had sourced from a domestic supplier) with imported services, those services and the domestic jobs associated with them are said to have been “offshored”.

Offshoring, though, has also (though less frequently) been used to describe the movement of domestic production (and the related jobs) offshore. In this case, the definition focuses not on imports of services from abroad, but on national companies investing offshore.

The term “offshoring” is sometimes used synonymously with the term “outsourcing”. However, outsourcing means acquiring services from an outside (unaffiliated) company or an offshore supplier. In contrast, a company can source offshore services from either an unaffiliated foreign company (offshore outsourcing) or by investing in a foreign affiliate (offshore in-house sourcing).

Source Publication:
United States Government Accountability Office, September 2004, International Trade – Current Government Data Provide Limited Insight into Offshoring of Services, Appendix II, Washington DC + investorwords.com.

Cross References:


Statistical Theme: Financial statistics

Created on Friday, November 26, 2004

Last updated on Friday, June 14, 2013