"If a foreign country can supply us with a commodity cheaper than we ourselves can make it, it is better to buy it of them." - Adam Smith, economist.
Corporate outsourcing is the strategy to attach vendors to handle certain tasks linked with the ongoing operation of the company. To make it possible for the business to save money and direct resources to other parts of the operation, there are a number of key functions that are often outsourced by small as well as large companies. These key functions include marketing and public relations, different accounting processes and human resources.
The term outsourcing dates back to the 1970's when companies, looking to become more efficient, began hiring outside the firm for less important processes. Outsourcing proved effective. Today outsourcing is as big as 70% to 80% in many companies. It is not rare that big companies outsource half of their IT operations. Some organizations now outsource their back office, including payroll, human resources and accounting in its entirety. Very soon, all companies may be outsourced more often than not. This will create a significant re-organization that affects managers, employees, executives and customers.
With the help of outsourcing, non-core activities, such as administration and back-office operations, core activities of the business can take center stage. Outsourcing these operations helps to put focus back on the core functions of the business, such as marketing and sales.
Some may argue that outsourcing equals a loss of control or quality, but it all depends on which company you choose to work with. It is crucial to choose your allies wisely, and by simply staying in touch; you will not lose control, nor quality.
Outsourcing, when used properly, is an effective cost-saving strategy. The lower costs of labor and operations is something that many find appealing. By relocation of some jobs to other, less expensive, parts of the world we can easily save costs, companies and people's jobs. Where the daily costs of living are not as high, companies can lower the salaries while still enabling their employees to keep a good standard of living. Every job created in these countries, by outsourcing, can lead to many more as new money flows in to the national economy, and is spent on local services and goods.
Even though outsourcing may have a few disadvantages in some situations, the benefits far outweigh them! Many pitfalls of outsourcing can easily be avoided by choosing the right company to work with. Before you decide to outsource, try to align the goals of your company and employee considerations with the objectives of outsourcing.
Outsourcing has come to be a well established model, and recognized as a long term strategy for success. The question today is not 'Why outsource?' but 'Why not outsource?'.