What is Outsourcing?
Updated: May 30, 2019
A hot topic nowadays, outsourcing has been the subject of business news. Whether for it or against it, nobody can deny that it is a business practice that has changed international business and the face of how companies are run since its growth in popularity.
Outsourcing is defined as the practice of acquiring goods or services from a supplier that is not within the company. Oftentimes, the term is used in reference to a foreign supplier. However, there are two types of outsourcing - domestic and foreign. Foreign outsourcing can be further broken down into two as well - "nearshoring" describes outsourcing to a nearby country while "offshoring" in turn refers to when tasks are outsourced to a distant country.
Another process sometimes involved in outsourcing is called "midsourcing" and occurs when a company outsources the outsourcing process as well. This helps in making the stream of outsourcing easier for the company, circumventing the necessity of creating a process for the entire subsequent outsourcing that will be done.
Although theoretically any position can be outsourced, it is often non-fundamental roles that provide support to companies which receive that treatment. These roles are ones that aid the company's infrastructure in keeping upright, and are typically public functions. Examples include human resource management, customer support, design, bookkeeping, accounting, contention creation, and research. The most commonly seen instance of outsourcing would be call centres located in the Philippines or India.
The practice of outsourcing can be traced back to the 1900s, where the Economist stated that it was a concept which was gaining in popularity amongst businesses from the time of the Second World War. It was not until the 1990s however that it received the press it started becoming accustomed to, thanks to Peter Drucker who coined the catchy slogan "do what you do best and outsource the rest".
The service provider, otherwise known as the company that is being outsourced to, has its own workers and facilities to complete these tasks that support the day-to-day operations of the hiring company. Because of this, you can expect a high quality of service while spending less on labour, especially if the company is based elsewhere, where labour costs are low.
Outsourcing is often done due to issues such as the shortage of required labour, or the cost of labour for a role being too high. From a business perspective, it makes practical sense to outsource such tasks that do not require or already have an in-house team.
Although in recent news outsourcing has received a negative reputation, it still has a solid foundation in its advantages to businesses. Its benefits number many: from cutting costs and reducing time spent on unnecessary projects and tasks, to creating the powerhouse you have always dreamt of your company becoming. Social concerns, on the other hand, may have little validity, as many outsourcing companies build up the communities they employ.
Regardless of what you think about outsourcing, it is merely a tool and a tool is only as good as the person who uses it. Use outsourcing effectively in order to reap all of its benefits and more!
Contact us today at firstname.lastname@example.org to see if outsourcing will work for you, how much it could potentially save you, and to find out more about how it all works.