Outsourcing is when a business hires an entity to perform services or create goods that are traditionally done in-house by the company's own employees. Outsourcing is generally undertaken as a cost-cutting tool. It may affect a wide range of jobs such as customer support, back office and manufacturing. Outsourcing was first recognized as a business strategy in 1989 and become popular in Business Economics during the 1990's.
Outsourcing helps businesses reduce labor costs significantly. It enlists the assistance of an outside business that is not affiliated with the company to complete certain tasks. The outside organizations normally have a different compensation structure with their employees than the outsourcing company, allowing them to complete the task for less money. This enables the company to save money and lower labor costs. In addition to cost savings, this enable business to better focus on the core aspects of their business.
Examples of outsourcing
Some of the biggest advantages of outsourcing are time, cost savings and business can focus more on their core business functions. A company may provide varies products or services and use an outsourcing company to handle customer support, tech support and varies other functions for the company. It’s not uncommon for companies to outsource a task like, order processing, customer service, telemarketing, and back-office work as well. When properly used, outsourcing can be a very effective strategy to reduce cost and can give a business a competitive advantage over its competitors.
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