A precise definition of outsourcing has yet to be agreed upon. The term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function - commonly one previously performed in-house - to an external provider.
When companies discuss outsourcing or contracting out, they mean the delegation of jobs or procedures that are crucial to the company to an external third party specializing in that particular work or activity.
This could be good for companies, both for the financial advantages it has and because the expertise of the third party may well enhance the company's overall operation.
The third party involved will generally handle the supervision and daily organization of the task assigned to them. And this is what differentiates outsourcing from merely purchasing the services or products of an outside company.
Company sectors where this practice is common include IT, human resources, real estate and accountancy.
The advantages of outsourcing were originally appreciated by a number of smaller, hi-tech companies that surfaced in the nineteen nineties, who began contracting jobs out to specialist firms since the small size of their companies meant they could not afford in house HR as well as customer service departments. The highly complex dynamics of the products also meant that these companies needed to buy the certain professional skills that were needed.
However, the outsourcing of call center operations continues to be the topic of much criticism - because the call center staff couldn't tell customers they weren't employed by the original company, yet they were often badly trained and did not have the technical ability to handle all complaints.
Present day practice normally involves data analysis services, since the Internet and rise in the use of computers have meant an increase in the volume of data that companies create - and also the skilled task of extracting genuine info from the data is easily delegated.
Outsourcing is usually used in conjunction with the related term off-shoring. This refers to the outsourcing of services to companies overseas, particularly to countries where there are lower labor costs, which increases the profitability of this option.
Off-shoring is usually condemned, as it is seen to take jobs away from workers in the home country and causes shortages of skilled labor in the host country.
When companies discuss outsourcing or contracting out, they mean the delegation of jobs or procedures that are crucial to the company to an external third party specializing in that particular work or activity.
This could be good for companies, both for the financial advantages it has and because the expertise of the third party may well enhance the company's overall operation.
The third party involved will generally handle the supervision and daily organization of the task assigned to them. And this is what differentiates outsourcing from merely purchasing the services or products of an outside company.
Company sectors where this practice is common include IT, human resources, real estate and accountancy.
The advantages of outsourcing were originally appreciated by a number of smaller, hi-tech companies that surfaced in the nineteen nineties, who began contracting jobs out to specialist firms since the small size of their companies meant they could not afford in house HR as well as customer service departments. The highly complex dynamics of the products also meant that these companies needed to buy the certain professional skills that were needed.
However, the outsourcing of call center operations continues to be the topic of much criticism - because the call center staff couldn't tell customers they weren't employed by the original company, yet they were often badly trained and did not have the technical ability to handle all complaints.
Present day practice normally involves data analysis services, since the Internet and rise in the use of computers have meant an increase in the volume of data that companies create - and also the skilled task of extracting genuine info from the data is easily delegated.
Outsourcing is usually used in conjunction with the related term off-shoring. This refers to the outsourcing of services to companies overseas, particularly to countries where there are lower labor costs, which increases the profitability of this option.
Off-shoring is usually condemned, as it is seen to take jobs away from workers in the home country and causes shortages of skilled labor in the host country.