Outsourcing

Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally,and sometimes involves transferring employees and assets from one firm to another. Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally,and sometimes involves transferring employees and assets from one firm to another. The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says 'made its presence felt since the time of the Second World War,' often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support). Outsourcing is also the practice of handing over control of public services to private enterprises, even if on a short-term limited basis. Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country). Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (Offshore outsourcing), and can be individually or jointly, partially or completely reversed, involving terms such as reshoring, inshoring, and insourcing. Some of the acronyms related to BPO (Business Process Outsourcing are: Global labor arbitrage can provide major financial savings from lower international labor rates can provide a major motivation for offshoring. Cost savings from Economies of scale and specialization can motivate outsourcing. Another motivation is speed to market; to make this work, a new process was developed: 'outsource the outsourcing process.' Details of managing DuPont's CIO Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Anderson Consulting were outsourced, thus avoiding 'inventing a process if we'd done it in-house.' A subsequently developed term to describe this is midsourcing. Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It also reduces the need to hire and train specialized staff, makes available specialized expertise, and can reduce capital, operating expenses, and risk.