Outsourcing in the Business Environment
| Author | Carolyn Ashe |
| Pages | 573-575 |
Page 573
Outsourcing (or contracting out) is a procedure involving the delegation of noncore operations or jobs from internal production to an outside resource. Outsourcing is a business decision that is often made to focus on core competences. A subset of the term, offshoring, also implies transferring jobs to another country, either by hiring local subcontractors or building a facility in an area where labor is cheap.
At one time, companies used outsourcing as a way to solve problems of high costs, redundant positions, and poor job skills. In the 1990s the reasons for outsourcing changed. Companies started to outsource to gain an advantage over their competitors. They wanted to improve their processes and build long-term relationships with their overseas partners. Currently, many companies see outsourcing as an indispensable business practice engrained in their corporate philosophy. Research has found that the next wave of globalization will be focused on outsourcing information technology (IT) departments.
When an organization decides that more personnel are needed, it must consider whether to hire more employees, contract workers, or outsource the functions. The focus is on efficiency and cost-effectiveness when deciding whether to outsource. This decision-making process involves internal analysis and evaluation, needs assessment and vendor selection, and implementation and management.
The procurement of services or products from an outside supplier or manufacturer in order to cut costs, outsourcing is one of the hottest emerging trends in business. Public and private sector agencies, lacking a clear, accurate way to measure the number of jobs in the United States that have been lost to outsourcing, or how many might be lost in the future, have yet to agree on the number of jobs that have been or will be affected. According to the Center for American Progress in 2004, the variation in the estimates shows the uncertainty and the difficulty in measuring these numbers.
As white-collar jobs move away with increasing regularity, a debate that once focused on the loss of manufacturing to foreign outsourcing once again became rampant. As companies rush to shed costs, outsourcing remains one of the fastest-growing solutions. Start-ups, encouraged by
Employees at a call center in Bangalore, India, provide service support to international customers.
their venture investors, were turning to outsourcing just like some big multinational companies. While 15 percent of the 145 large companies surveyed by Forrester Research Inc. early in the twenty-first century revealed that outsourcing was a permanent part of the offshore strategy, an informal survey of venture capitalists suggested 20 to 25 percent of the companies invested had a comparable commitment.
The changing face of business and the need to stay ahead in the game forced companies to look for ways to reduce costs. As a result, outsourcing has become the solution for both the private and public sectors. The growing...
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