Sourcing models: What and when to outsource/offshore

While global sourcing has been gaining wider recognition as a significant approach to boost the efficiency and competitiveness of the firm, various types of global sourcing models have begun to emerge. These include domestic outsourcing, offshore outsourcing, domestic insourcing, and captive models. The major distinction between these models lies in whether the function is performed by a subsidiary business unit of the firm or by an external vendor, and also whether the function is performed in the country where the organization is located or in an offshore location. More specifically: Domestic outsourcing refers to contracting with a third party who is situated in the same country as the client organization for the completion of a certain amount of work, for a specified length of time, and at a certain cost and level of service. Offshore outsourcing, on the other hand, refers to outsourcing arrangements with vendors who are situated in a different country from the client organization. Domestic insourcing refers to managing the provision of services internally, within a business unit that is located in the same country as the organization. Captive models refer to the strategic choice to locate organizational activities within a wholly owned subsidiary in another country.