What is difference between outsourcing and offshoring?

Outsourcing and offshoring are frequently used synonymously, although the terms have two very distinct meanings and implications. Outsourcing is when an organization negotiates a contract with a third party to perform a particular function. When outsourcing a process or operation, it is essential to find an organization or person that specializes in the task at hand. However, offshoring is when an organization sends in-house jobs to be performed in a different nation. An instance of offshoring is for a United States based organization to produce their products in Mexico. Both offshoring and outsourcing eventually save organizations money, but they reduce costs in very distinct ways.