|  | 
| | What is Outsourcing? |
|
Outsourcing became part of the business lexicon during the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labor, capital, technology and resources. Though often used interchangeably, outsourcing differs from off shoring in that outsourcing is relative to the restructuring of the firm while off shoring is relative to the nation
though the two are not mutually exclusive, especially under conditions
of globalization.
"Outsourcing" involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different from traditional relationships between buyer and seller of services in that the economic entities involved in an "outsourcing" relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services. |
Many organizations today are making the decision to outsource. In today’s global marketplace outsourcing has made itself accessible to many organizations on a national and international level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs in developing countries with few workers rights laws and to exploit the value of artificially manipulated foreign currencies, where the exchange rate is intentionally undervalued. Through outsourcing, companies today have the ability to develop competitive strategies that will leverage their financial positions in the ever competitive global marketplace.
Outsourcing is also successful in increasing product quality and/or substantially lowering firm and consumer costs (e.g., increases the quality to cost ratio). Because outsourcing allows for lower costs, even if quality reduces slightly, which is sometimes the case, productivity increases, which benefits the economy in the aggregate. Outsourcing can also present advantages to less developed, typically non-Western states. "Developing" countries, such as China, Philippines, and India, but also countries of Eastern Europe, benefit from the patronage of companies that outsource to them - in terms of increased wages, job prestige, education, and quality of life.
Some of the major advantages that today’s organizations can expect to obtain through outsourcing include the
ability to purchase intellectual capital, to focus on core competencies, to better anticipate future costs,
to lower costs. Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services. Criticisms of outsourcing from both management and consumers often focus on a central question: is the performance or quality of the outsourced service, or new organization of labor, on par with the expected standards of management and consumers - i.e. how does outsourcing a service affect its quality as opposed to "in-house" work. Such judgments are reserved to prevailing cultural values that define what is and is not good service.
|
| 
| | 
|
|  | | Read variety of latest and useful articles. Our Answer Library includes topics from shopping, health, sports, entertainment and latest technology. |
|
|
|
|
|
