Outsourcing
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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