The Webster's Universal Dictionary meaning of "Outsourcing" is: "A company or person that provides information; to find a supplier or service, to identify a source". It is very important to be clear about what is meant by outsourcing. Outsourcing essentially refers to how things are done rather than what is done. It describes how for example IT services are obtained; not what the services are
Very simply outsourcing can be seen as a process in which a company delegates some of its in-house operations/processes to a third party. Thus outsourcing is a contracting transaction through which one company purchases services from another while keeping ownership and ultimate responsibility for the underlying processes. The clients inform their provider what they want and how they want the work performed. So the client can authorize the provider to operate as well as redesign basic processes in order to ensure even greater cost and efficiency benefits. Although the above meaning of outsourcing may seem very similar to contracting, it is to be said that contracting and outsourcing are in no way related. Generally in contracting the ownership or control of the operation or process being contracted is with the parent company, whereas in outsourcing the control of the process is with the third party instead of the parent company. So in other words, outsourcing can be stated as phenomena in which a company delegates a part of its in-house operations to a third party with the third party gaining full control over that operation/process. One way of looking at it is that outsourcing is just a name for already existing practices. Services such as, bureau services, contract programming and project management have been outsourced for a long time. In its present meaning, however, outsourcing refers to a greater level of handing over ownership and/or managerial control than has before been the case.
Companies turn to resources outside their organizational structure, usually to save money and/or make use of the skilled professionals. For instance, a company might outsource its IT management because it is cheaper to contract a third-party to do so than it would be to build its own in-house IT management team. Or a company could outsource all of its data storage needs because it is easier and cheaper than buying and maintaining its own data storage devices. A business might also outsource its human resource tasks to another enterprise instead of having its own dedicated human resources staff.
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