Which statement is true of offshore outsourcing?
The true statement is that offshore outsourcing lets a company concentrate on its core competencies—the areas where it can grow and add the most value—while a lower-cost overseas provider handles non-core work. It does not make internal communication easier.
The answer
Among the usual options on this MIS question, the statement that is true is: offshore outsourcing allows a company to focus on its core areas or core competencies where it can grow. When a firm sends routine or specialized functions (customer support, coding, back-office processing) to an overseas provider, management time and capital are freed up for the activities that actually differentiate the business. That focus—plus lower labor costs—is the central reason companies do it.
A second true idea often paired with this: improved telecommunications and the internet have made offshore outsourcing far more attractive over the last two decades, because work and data can move across borders instantly and cheaply.
Why the other options are wrong
- "It makes internal communication easier." False. Spreading work across countries, time zones, and languages makes coordination harder, not easier. Teams must bridge an 8–12 hour time gap, cultural differences, and remote hand-offs. Communication is one of the recognized risks, never a benefit.
- "It is the same thing as offshoring." False, and a common trap. Offshoring means moving work to another country—it can still be done in-house at a company-owned foreign facility. Outsourcing means hiring a third party to do the work. Offshore outsourcing is the combination: a third party in another country. Confusing the two is the mistake this question tests.
- "It always reduces product or service quality." False. Quality is a genuine risk to manage, but it is not guaranteed to fall; many providers meet or exceed domestic quality.
- "It eliminates all business risk." False. It introduces new risks—loss of control, security and IP exposure, hidden coordination costs, and political or currency instability.
The bigger picture
Think of the decision along two axes. Location: domestic vs. offshore. Ownership: in-house vs. outsourced to a third party. Offshore outsourcing sits in the offshore + third-party corner.
The strategic logic comes from core-competency theory: a firm should own the activities that create competitive advantage and buy the rest. Payroll processing rarely wins customers; a great product does. So handing payroll to a low-cost overseas vendor lets scarce management attention flow to the product.
The trade-off is control. Every function you push offshore and outside your walls is a function you coordinate at arm's length. Successful programs invest heavily in clear contracts (SLAs), overlapping working hours, and communication tooling precisely because distance makes communication harder—confirming why that answer option is false. The benefits (focus, cost, scalability, access to global talent) are real, but they are earned by actively managing the risks, not by pretending the risks disappear.
| Lets a company focus on core competencies where it can grow | True | Frees management and capital for value-adding work |
| Improved telecommunications increased its attractiveness | True | Data and work now move across borders instantly and cheaply |
| Makes internal communication easier | False | Time zones, language, and distance make coordination harder |
| Is identical to offshoring | False | Offshoring = another country; outsourcing = a third party; this is both |
| Always lowers product quality | False | Quality is a risk to manage, not a guaranteed outcome |
| Eliminates all business risk | False | Adds control, security, IP, and political risks |
Frequently asked
What is the difference between offshoring and outsourcing?
Offshoring means relocating work to another country, which can still be done by your own employees in a company-owned facility. Outsourcing means paying a third-party firm to do the work, whether domestic or abroad. Offshore outsourcing combines both: a third-party provider located in another country.
What are the benefits of offshore outsourcing?
Lower labor costs, the ability to focus internal resources on core competencies, access to specialized global talent, round-the-clock productivity across time zones, and scalability without large fixed investments.
What are the risks of offshore outsourcing?
Loss of managerial control, harder communication across time zones and languages, data-security and intellectual-property exposure, quality-control challenges, hidden coordination costs, and political, legal, or currency instability in the provider's country.
Why has offshore outsourcing become more attractive?
Improvements in telecommunications and the internet let firms move work, data, and communication across borders almost instantly and cheaply. Combined with large wage gaps between countries, this made sending non-core work abroad far more practical.
What is an example of offshore outsourcing?
A U.S. company hiring an India-based firm to run its customer call center or write software is a classic example: the work is done by a third party (outsourcing) located in another country (offshore).