What Is Outsourcing?

Outsourcing as per definition means to obtain goods or services from an outside company. Today’s economy is solely based on a trading system where one produces a good or provides a service and we pay to obtain it. We get paid in the same fashion by offering a good or service to someone. This practice has been going on for centuries, albeit, since the barter system was introduced and possibly even before that. However, the term ‘Outsourcing’ even though it appears to have the same definition and the same function, is a fairly new one. Here is why.
Outsourcing in modern terms is used to identify a good or service that is given to a firm outside of the company to perform. This includes a variety of services from technical to professional to in the case of the automobile industry, whole parts. You must have all heard of or even experienced the call centre consultancy that most companies opt for in places such as India where one’s call gets automatically transferred.
And you complain about your home internet connection in Texas to call center consultants half way across the world. While this practice takes away certain customers and creates dissatisfaction, the companies still continue to use this due to a number of reasons.
When considering a call center alone, there are a number of costs involved from human resource to maintenance to tech support. A call center is also expected to be in operation twenty four hours a day which thereby requires a significant amount of management time and resources to maintain. However, a process such as a call center which is simply used as a customer care center or after sales complaint center, adds little value to the core function of the organization. The benefits it brings compared to the costs it incurs is significantly imbalanced and hence the reason most companies opt for outsourcing their minor functions to other external companies.
In recent times however, more and more companies are looking at outsourcing even some of their core functions such as IT and financial management. There are companies which handle your finances for you and make sure everything is on record, much like a legal consultancy firm. These specialized functions being done by actual external specialists mean you reduce on otherwise very expensive HR costs as well as ensure a quality job is done, while allowing the top management to concentrate solely on the core functions of the company, be it manufacturing or research and technology. Outsourcing can be done by both small and large firms in various capacities.