Outsourcing
Articles >> 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.
