Definition of outsourcing

Outsourcing commonly refers to using resources of a third-party company to perform activities traditionally handled in-house. Simply, business services outsourcing is a transaction when one company acquires services from another company maintaining ownership and complete responsibility for the processes.

There are multiple reasons why companies turn to outsource various jobs including corporate growth, speeding up the pace of innovations and spending more time with customers. But the prime one has always been and is likely to remain is lower costs. Companies that provide outsourcing services are capable to perform the same job for less money often due to the level of economic development of the country it locates in. However, some companies have their jobs done with the help of out-house resources simply because they don’t have the right competency or access to new technologies. Among other reasons for transferring a part or even entire process to an external service provider are reduced time to market, access to talents, tax benefits, knowledge and many more.

Looking for better quality and lower costs companies address to other companies outside their organizational structure. For instance, it is much cheaper and more reasonable to outsource a company’s IT management to a third-party rather than build its own in-house IT management team.

Offshoring

Another term used with a similar meaning is offshoring. Offshoring is the type of outsourcing in which transferred services are delivered by companies from other countries. Still, both terms are used interchangeably in terms of ever increasing globalization.

Whereas you can not but admit undoubtful economic benefit of the phenomenon, there is a strong conviction that outsourcing has a detrimental effect on local labor markets, the level of unemployment and the quality of services provided.