BPOAI Feature / Philippine BPO Industry

Outsourcing vs Offshoring: What's the Difference?

Outsourcing changes who does the work and offshoring changes where it is done: a sourced two-by-two guide with a Philippine example for every quadrant.

By Marco Perrott, Founder & CEO, LyrIQ AI· Last updated: October 6, 2026

Photo: Pexels

38 billion dollarsin 2024 with 1.82 million employees
899defines outsourcing as any contractual arrangement between a bank
100,000Philippine staff across 50 sites in 20 cities
50 sitesin 20 cities

Outsourcing and offshoring answer two different questions about the same piece of work. Outsourcing is about who does it: the task moves from your own staff to an external provider, whatever country that provider sits in. Offshoring is about where it is done: the task moves out of your home country, whether it lands in your own foreign subsidiary or in someone else's operation.

That split is not a blogger's convention. It is how the OECD and the WTO carve up the terms, and it matters commercially because the two choices carry different contracts, different risks, and different price tags. This guide states the sourced distinction, lays out the four-quadrant matrix both institutions use, and pins a working Philippine example to each quadrant.

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The distinction rests on two criteria: location and ownership

An OECD scoping paper on offshoring published in 2024 makes the cleanest institutional statement of the difference. It defines outsourcing as "contracting out a specific part of business operations to a third party", adding that the third party "may or may not be located in a foreign country". Offshoring, in the same paper, follows the OECD's 2007 definition: the total or partial transfer of an activity abroad, "either to an existing or new affiliate, or through subcontracting to non-affiliated companies".

The paper then states the rule worth memorising. The two concepts are separated by "the location where a task is performed (domestic or abroad) and the ownership of the unit where the task is performed (in-house or external)". Outsourcing moves work across the ownership line. Offshoring moves it across the border. A single sourcing decision can do one, the other, both, or neither.

The WTO drew the same map two decades earlier. A thematic essay in the World Trade Report 2005 describes outsourcing as transferring some of a company's recurring internal activities and decision rights to outside providers under a contract, then classifies four types of sourcing "using location and control/ownership as distinguishing criteria".

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Crossing the two criteria produces four operating models

Put location on one axis and ownership on the other and every sourcing arrangement falls into one of four boxes. The WTO's 2005 chart, adapted from OECD work, names them as follows:

Domestic in-house (home country, own staff). The default: work done by your employees in your market. The OECD figure calls this quadrant domestic internal production.
Domestic outsourcing (home country, external provider). The WTO labels this non-captive onshore outsourcing. Outsourcing has happened; offshoring has not.
Captive offshoring (abroad, own staff). In the WTO's wording, supplies "sourced from an affiliated firm abroad". This is the offshore center a company owns and staffs itself, known today as a global capability center (GCC) or global in-house center. Offshoring has happened; outsourcing has not.
Offshore outsourcing (abroad, external provider). The WTO's non-captive offshoring, where the supplier "is a non-affiliated firm and located abroad". Both levers pulled at once. This is what most buyers mean when they say they are offshoring to the Philippines.

The labels wobble between institutions, and the WTO itself notes the OECD once filed offshoring as a subcategory of outsourcing. The boxes, however, are stable. Remember the matrix, not the vocabulary.

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Every quadrant has a working Philippine example

Offshore outsourcing: Concentrix serving foreign clients

Concentrix, an American-headquartered CX provider, was profiled in the Philippine Daily Inquirer at around 100,000 Philippine staff across 50 sites in 20 cities, described as the country's largest private employer, handling communications, financial services, retail, technology and healthcare work for client companies. Its foreign clients are outsourcing (external provider) and offshoring (work done in the Philippines) at the same time. The quadrant is the engine of the wider sector: Philippine IT-BPM revenue reached 38 billion dollars in 2024 with 1.82 million employees, per IBPAP, with demand led by US businesses.

Captive offshoring: JPMorgan Chase's global service center

JPMorgan Chase runs its own Philippine operation rather than contracting one. Press coverage of its second Uptown Bonifacio tower reported the bank doubling its Manila workforce to about 20,000 in 2025, supporting the firm's lines of business worldwide. Those employees are on the bank's own payroll: offshoring without outsourcing, the classic captive center or GCC.

Domestic outsourcing: Philippine banks and local service providers

Outsourcing needs no border. Philippine banks routinely contract local providers for collection, marketing and processing work under Bangko Sentral ng Pilipinas rules. BSP Circular 899 defines outsourcing as "any contractual arrangement between a bank and a qualified service provider for the latter to perform designated activities on a continuing basis on behalf of the bank". A Manila bank hiring a Manila BPO sits fully in this quadrant.

Domestic in-house: the functions banks must keep

The same BSP framework marks the fourth quadrant by exclusion. Deposit-taking, the granting of loans, risk-taking and strategic decision-making are inherent banking functions that banks are prohibited from outsourcing, so at every Philippine bank this work stays with its own employees, onshore.

Pick the model by control, scale and cost, not by the label

Outsourcing, on either shore, fits when the task is standardised, volumes fluctuate, and the buyer wants a provider's existing capacity instead of building its own. Captive offshoring fits when regulatory accountability, data control or intellectual property argues for direct employment, and when headcount is large enough to carry the fixed cost of a foreign entity; JPMorgan's 20,000-person Manila operation is that arithmetic at full scale. Offshore outsourcing combines the widest cost gap with contract flexibility, which is why most Philippine engagements, and most of the sector's 1.82 million jobs, sit in that quadrant.

Buyers weighing the external-provider route can compare verified Philippine providers in the BPO AI directory. Readers building up the vocabulary can start with the foundational explainers in the BPO AI academy, and quarter-by-quarter movement across all four quadrants is tracked in BPO AI news.

Further reading

Transec BPO Review 2026: Small-Team Outsourcing from Pasig, Examined

Philippine BPOs with AI-readiness tiers that are checked, not claimed.Browse the BPO directory

6Sources and methodologyEvery figure on this page carries a source URL, retrieval date, and confidence score

Definitions were quoted from the fetched primary texts of the WTO World Trade Report 2005 thematic essay on offshoring services and the OECD 2024 scoping paper on offshoring and reshoring, not from secondary summaries. Philippine quadrant examples were verified against national press reports and a reproduction of BSP Circular 899, all retrieved on 2026-08-08. Every figure and attributed definition carries a source URL, retrieval date, and confidence score; company-scale figures from press coverage are scored as third-party reporting rather than audited data.

01Four types of sourcing classified 'using location and control/ownership as distinguishing criteria': captive onshore outsourcing, non-captive onshore outsourcing, captive offshoring (supplies 'sourced from an affiliated firm abroad'), and non-captive offshoring (supplier 'is a non-affiliated firm and located abroad'); outsourcing defined as transferring recurring internal activities and decision rights to outside providers by contractWTO, World Trade Report 2005, Thematic Essay C: Offshoring Services (pp. 266-267, Chart 1) · retrieved 2026-08-08 · confidence 0.90
02Outsourcing defined as 'contracting out a specific part of business operations to a third party' that 'may or may not be located in a foreign country'; offshoring as the total or partial transfer of an activity abroad 'either to an existing or new affiliate, or through subcontracting to non-affiliated companies'; distinction drawn on 'the location where a task is performed (domestic or abroad) and the ownership of the unit where the task is performed (in-house or external)' with a 2x2 figure (domestic internal production, domestic outsourcing, production by foreign affiliate, international outsourcing)OECD, Offshoring, Reshoring, and the Evolving Geography of Jobs: A Scoping Paper, DELSA/ELSA/WD/SEM(2024)6, p. 7 · retrieved 2026-08-08 · confidence 0.88
03Philippine IT-BPM industry revenue of $38 billion in 2024, up 7% from $35.5 billion in 2023; employment of 1.82 million, up from 1.7 million; demand led by US businesses in banking, financial services and healthcare; roadmap targets of $59 billion and 2.5 million jobs by 2028 (IBPAP figures)The Philippine Star, 'IT-BPM revenues hit $38 billion in 2024' (citing IBPAP president Jack Madrid) · retrieved 2026-08-08 · confidence 0.84
04Concentrix Philippines at approximately 100,000 employees across 50 sites in 20 cities, described as the country's largest private employer, serving clients in communications, financial services, retail, technology, travel and healthcarePhilippine Daily Inquirer, 'PH largest private employer Concentrix sustains remarkable growth with 3 new sites launched' (August 2022) · retrieved 2026-08-08 · confidence 0.80
05JPMorgan Chase doubling its Manila workforce to about 20,000 in 2025 across two Uptown Bonifacio Global City towers; Manila described by the firm as the site of its expanding global service center supporting its lines of businessInsiderPH, 'JPMorgan takes over 2nd Uptown BGC tower, doubling Manila workforce to 20,000' · retrieved 2026-08-08 · confidence 0.78
06BSP Circular 899 (Monetary Board Res. 2115, Dec 2015) definition of outsourcing: 'any contractual arrangement between a bank and a qualified service provider for the latter to perform designated activities on a continuing basis on behalf of the bank'; inherent banking functions (deposit placement and withdrawals, granting of loans, position-taking and market risk-taking, risk management, strategic decision-making) may not be outsourcedRural Bankers Association of the Philippines, reproduction of BSP Circular No. 899: Amendments to the Guidelines on Outsourcing · retrieved 2026-08-08 · confidence 0.82

Confidence scale: 0.90–0.98 registry or official data, 0.75–0.89 third-party aggregated, 0.50–0.74 self-attested. Figures that could not be sourced were removed rather than published.

The distinction rests on two criteria: location and ownership

Crossing the two criteria produces four operating models

Every quadrant has a working Philippine example

Offshore outsourcing: Concentrix serving foreign clients

Captive offshoring: JPMorgan Chase's global service center

Domestic outsourcing: Philippine banks and local service providers

Domestic in-house: the functions banks must keep

Pick the model by control, scale and cost, not by the label

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