Outsourcing
Articles >> Definition of 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 defined 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 definition 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 defined 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.
