What Is Outsourcing?
May 12th 2009 09:17
The practice of outsourcing in business has been around for many years. It is a phenomenom that is sweeping the business industry and affecting all sectors of the economy. Outsourcing is defined as “the transfer of an internal service function to an outside vendor.” In it’s most simple form, it is a term for having someone else do your work. Other terms used are contracting out or subcontracting to denote buying a product or a service from an outside supplier rather than providing it in-house.
Outsourcing trend in 1970s simply involved a supplier managing and operating a function formerly carried out in-house. During the 1980s outsourcing evolved toward closer collaboration between two companies; in the 1990s the trend is toward fuller partnerships.
Today, companies could outsource some of their functions overseas. The trend towards global outsourcing can be traced primarily to two factors : cost-reduction pressure and advances in telecommunication technology. Big corporations are paying educated foreigners to do the same chores as Americans for a fraction of the cost. Thus, operating costs go down, and profits go up, driving the company’s stock up.
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