What is the difference between shared services, outsourcing, and offshoring? This BAR exam lesson explains three business models for streamlining operations — centralizing support functions into shared services, contracting work to external vendors through outsourcing, and relocating processes abroad through offshoring — along with the advantages and disadvantages of each. Built for accounting students and CPA, CMA and EA candidates studying business operations.

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Video Timeline & Key Concepts:
0:00 — Introduction to alternative business/support service options
0:24 — Shared services: centralizing support functions
4:20 — Outsourcing: contracting work to external vendors
7:24 — Offshoring: relocating processes to another country

Frequently Asked Questions:

What are shared services?

Shared services consolidate support functions like HR, payroll, or accounting that were duplicated across business units into one specialized internal unit to reduce duplication and gain economies of scale.

What is the difference between outsourcing and offshoring?

Outsourcing hires an external vendor to perform a task regardless of location, while offshoring specifically moves the work to a foreign country, often for lower labor costs.

What are the advantages of outsourcing?

Outsourcing provides access to specialized expertise, cost savings, and faster time-to-market without building in-house resources.

What are the risks of offshoring?

Offshoring can bring language and cultural barriers, quality control challenges, ethical concerns about labor practices, and political or domestic backlash.

Why do employees resist shared service models?

Centralizing functions can create resistance to change and a perceived loss of departmental autonomy, and a disruption in the shared unit can affect the whole organization.

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