Outsourcing is when you hire an outside vendor, agency, consultancy firm, etc. to perform certain non-core functions of your business (e.g. billing, AP/AR, Call Center, HR, etc.). Outsourcing functions can be done across the street or across the globe. Offshoring is the process of moving those functions mentioned above to an offshore location. This is done for many reasons, but some of the main reasons are for cost savings, hours of operation, or because the Offshore provider specializes in that particular function.