What is Outsourcing?

business economy

Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas.

There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.

Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.

There are some disadvantages to outsourcing as well. One of these is that outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides. There is also the danger of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon its outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.

While outsourcing may prove highly beneficial for many companies, it also has many drawbacks. It is important that each individual company accurately assess their needs to determine if outsourcing is a viable option.

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59
I agree, outsourcing is done primarily for economic reasons, but there are American outsourcing options that are competitively priced with offshore companies.
- WebTechTeam
58
There would be no Wal mart! Wal-Mart creates more jobs probably by outsourcing and paying americans to run the store.

Instead of paying us low wages to assemble and sew, we can be paid a little more and sell the products, not that making a product in america is bad either, but it's a gentle give and take. I do think companies should be taxed a bit more for it to keep its base in america and send its production over seas just to be brought back here and sold. But think of how much harder it would be for some people to survive without a place like wal-mart.

It might not be the best of everything, but people who couldn't afford those things, makes it easier to have so we all can like in a social norm.

- anon52641
57
Have any of you people who think outsourcing is "evil" actually done any homework on the effects of outsourcing?

I don't want to get into a tutorial of economics 101, but outsourcing is necessary and not done out of greed. Businesses outsource those functions that can be done cheaper and better by those who specialize in it. Remember if the quality is not there, the outsourced function will cost the company more in the end and will therefore not be a viable solution. And not all outsourcing is overseas outsourcing.

However, if something can be done better overseas and you are upset about it, then do it better here, don't whine like a child and force our American companies to pay the price of efficiency because you can't figure out how to pay your bills.

- anon52087
56
The other day I had a software issue. I had to contact Mcafee, Norton, Hewlett Packard and Microsoft. All of these companies had outsourced and I had a hard time understanding them. Is it any wonder why our unemployment is so high? These American companies should be ashamed of putting there fellow employees out of a job. Wake up U.S. government and help.
- anon52085
54
Yeah, With no doubt "outsourcing is a cost-effective way", and it saves your time and work. The problem is, as many people mentioned, how can we rely on outsourcing as "outsourcing often eliminates direct communication between a company and its clients". As more people complain of the call center, no one will use your service any more, which leads outsourcing to be a "cost-ineffective way". Think agencies are required to deal with such problems between a company and its clients. In this way, IT outsource seems perform better than others. Outsourcing platforms provide service and safeguard for both companies and clients.
- TaskcityCom
53
Outsourcing is nothing more than the ugly face of corporate greed in America!
- Leathersam
52
We have the same problem right now with all the chicken-manufacturing companies! Corporations such as Tyson and Cargill have been putting pressure on Congress to lift the ban on Chinese chickens because they are building factories in China.

In addition to ongoing problems with China's food safety standards and inspection system, there have been specific problems with Chinese poultry processing facilities, such as filthy and unsanitary conditions. Even worse, China has experienced several outbreaks of the very contagious bird flu that has not only infected poultry but also been fatally transmitted to humans.

Outsourcing hurts Americans! There are plenty of chicken farms in America that would love to have the business but Tyson and Cargill are building plants in China to try and get around the ban!

- Leathersam
51
I am so thoroughly sick of calling one of my service providers and getting first, a phone tree (a machine) and then the machine transfers me to some lunkhead in India. I realize the lunkheads in India are cheaper than the lunkheads in America and companies probably do not have to provide benefits to the lunkheads in India, but the customers are suffering due to your cheap choice, corporate America! American citizens who are currently out of work would love to have that job you gave to a machine or any one of those jobs you gave away to India! Start doing the right thing corporate America and support your own country for a change, you cheap creeps!
- Leathersam
49
Its un-american not to support americans when you are an american, think about it! Shipping jobs over seas is the same as cutting your own wrists. it's a slow death!
- anon50543
48
What other reasons would you outsource other than saving money?
- anon43732
47
I think that outsourcing is ridiculous. Just because some greedy CEO wants to take away jobs from americans and give it to a person from a country they probably haven't been to so they can buy a mansion or somthing is just wrong.
- anon42650
46
i cannot read the text in gray (or white). it almost looks blank. try dimink/chris purcell. he can take your site to another dimension.

- anon41443
45
Considering IT is next big push for "outsourcing" it may be time for the "brains" to join up with the "brawn" before the United States becomes the next 3rd world country. There will be no jobs hence no money. I wonder what India will purchase from the US? Maybe we can make cheap knives. Hey and anon10195 perhaps you don't understand. No jobs = no money. We call can't go on DHSH.
- anon40695
43
outsourcing may be good. how are people supposed to buy products made outside the USA if they do *not* have work, thus, no money to buy? by the way, the quality from outsources is terrible, as terrible can be.
- anon37759
42
Outsourcing is awful!
- anon35675
41
I am torn.

I believe the way it should be is that we are a world market; all humans after all. We all need food on our tables.

We need to not go to the lowest bidder *if* their country doesn't have minimum wage and workers' rights.

When did we start seeing people as costs and not assets? When did business, business, business take over??

- anon35674
40
I work in a call center in California for a big health company. They are outsourcing the vendor calls we get. The vendor calls are usually out sourced jobs and now the people who are taking there calls are outsourced also.

What really bothers me is a lot of the people who are outosurced are rude and do not understand English. And I see the work that comes back and it is done incorrectly. It is a joke!!

- anon35489
39
As it says: A sword has two blades. Outsourcing has its own pros and cons. But still there's many corporations that benefit a lot from outsourcing service. A good and reliable outsourcing company can reduce risks and save costs for clients. Like our company, I could say once a customer adopts our service, it's just the beginning of a 15-year relationship at least. We're not driven by mere interest at all, but to our customers' satisfaction.

As for the unemployment, I'm wondering why those Hollywood stars have so much wealth that they cannot even squander up. Maybe disparity is around everywhere. And there's always a way forward to solve any problems.

- michelle61
38
I think outsourcing is a great thing for everyone involved. I got my career started by outsourced projects on a website that helps freelancers find jobs and have not looked back.

Outsourcing, especially via such websites allows people from the world over to make good money while having the flexibility of a freelancer.

- anon35156
36
Madonna:

People in third world countries not only support to increase your fortune in buying your stuff but they also give happiness to families in giving children to be adopted...like Manila, India, etc.

I think Outsourcing is good, because it will reduce cost...Companies from anywhere will benefit from Outsourcing. Companies from Europe as well as from America = from Canada, Mexico to the end of the American continent Argentina.

- anon33950
35
We run a small Business Process Outsourcing company in Davao City, Philippines. It's an exciting industry that continues to grow as the world goes through the financial crisis. The future for outsourcing worldwide is strong.
- TryBPO
34
Business Process Outsourcing needs to be carefully undertaken. Credibility of the outsourced company is to be considered. People do deliver, but it is after all a matter of understanding, efficiency and effective communication, which finally delivers the results.
- outsource247
33
Outsourcing makes sense, if you are looking for the citizens of this country to die!! The better solution, in my opinion, is to make *everything* more affordable. Yes, that means prices will have to come down on everything we buy. Of course, that will mean that wages will also have to reflect that downturn. But, if we use our parents and grandparents for examples, they were able to live on lower wages, because everything cost so much less. My mom told me that it cost a nickel to go to the movies. And back then they could see 2 or 3 movies!! I believe the dollar was worth a dollar back then.

I'm sorry, but I think this country is in a world of hurt. We allow foreigners to enter this country, *and they don't have to pay taxes for a certain number of years.* This is *our country*. *We have to pay taxes. Does this make sense to anybody?* It certainly doesn't to me.

What do you think?

- anon31139
32
Companies like Dell, who outsourced like crazy, recently moved many of those jobs back to the U.S. precisely because their quality suffered from it. Capitalism allows people to vote with their dollars, and vote they did.

Yes, workers in impoverished countries get crummy wages making sneakers for U.S. companies... as opposed to *no* wages and starving to death. It is a human rights issue worth working on, but cutting their means of making money is not the answer.

Try this on for size: Americans are now starting to go abroad to countries like India for big operations, because they get advanced, quality healthcare for 1/10th the cost. Google "Lower costs lure U.S. patients abroad for treatment."

Ain't capitalism grand?

- anon29193
31
I think outsourcing is bad, I mean, why send all of our jobs to foreign countries when we're suffering from unemployment? Maybe if we kept our jobs in the good old U.S. of A, we would have less unemployed people, have to pay less welfare, and maybe that would make us come out of the economic problems we're having!!
- anon29114
30
Hello, one question - When a project is outsourced who should manage the project - the internal group or the outsourcer? Why?

thanks

KP

- anon27859
29
I think Outsourcing totally sucks and the only reason a company does it is to save money. Instead of paying someone here in the US 34,000 a year to do A/R, its cheaper to ship it off to Manila and pay someone 6,000 a year. *And* they screw everything up. I have canceled credit cards, cable, Ebay, Paypal, etc because their customer service is in another country. *Hello*! I have never once solved an issue that I've had so I settled it by canceling it.

I called Dell to buy a laptop and the person on the other end was in India. Click - sorry no sale from me. Countless other Americans feel the same way that I do. How dare you ship our jobs overseas.....we are suppose to take care of each other here in America. Not people in third world countries.

I pray every night that the president will stop this. This is what's killing our country. Please stop outsourcing!!!! Please!!!

- Madonna
28
Excellent post...

Outsourcing will reduce cost and increase quality....

Regards, SBL

- anon26908
27
I need to now more about outsourcing disadvantages.
- anon24752
26
Outsourcing your IT services can be extremely beneficial to a company. Companies will outsource for different reasons. Outsourcing is generally lower costing than hiring and training people for an in-house IT department; the company might have limited resources. Also outsourcing companies are very specialized and have more knowledge about the industry. As for the olittlewood post: quality outsourcing companies will be wary about who they hire and the impact it has on company-client interactions. Outsourcing can be a beneficial tool for businesses in the short term and long term. Short term it allows them to cost cut; long term it allows for the company to focus on core business functions.

Hope this helps!

- anon24639
25
Hello IAA members and u who u are reading now!!..what are the circumstances that could lead a firm to outsource its IT functions rather than continue with Internal Information system units?
- Aggreyalmas
24
I'm a student at the Institute of Accountancy Arusha (IAA)-Tanzania, I would like to know if outsourcing is important in achievement of long term plans of an organization then why not for most organization who are not using IT outsourcing start using it? And do you thing you guys that the world will do without outsourcing?
- Aggreyalmas
23
Hello guys...Please, in your own opinions, what do u think are the issues involving the procurement of an Information System? Also, what are the financial considerations in IS outsourcing? Thank you.
- DigitalMd
21
Is it possible for the US to completely stop outsourcing of work to India and do it themselves?
- anon18007
20
Everyone's experience is different on outsourcing, but there is always a negative to a positive and vise versa.

Outsourcing should not be used if one is trying to just save money, but because it makes sense in the long term process of becoming successful in ones project or daily task.

Thus before outsourcing one should consider to create a formula that proves that outsourcing is a long term benefit than short term. So it is not just the cost one should consider, but who they outsource the work to.

In our company we are trying to create innovative ways to achieve the success of individuals and small businesses. Thus if you are not in this circle, than your outsourcing formula should prove that outsourcing to our company is not for you.

Remember this is just a one scenario and one should consider there own variables prior to choosing to outsource or not.

- anon17241
19
Outsourcing is also now being interchanged with the word offshoring, when in fact that shouldn't be the case. When you say you'll outsource something that means you will have a role or task done outside your company, it can be within your country or outside. When you say offshoring, it is outsourcing something outside your country.

- anon15801
18
Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business.

Anju

- anon14034
17
Great post! Thank you very much.

When it comes to outsourcing, I think BPOVIA is much better virtual assistant provider compare to Getfriday.

I compared the Cost, Signup Process, Payment Process, Cancellation of Service, Refund Policy of 2 companies.

- anon13897
16
I agree with anon13668! These days money is more important than the individual, and the bosses of a company still wonder why they are running a company almost as expensive as another which uses no outsourcing?

Outsourcing is great for someone to get to know the job in a matter of 2 weeks to 3 months, depending on the intensity of the job; but people get fed up with companies thinking things are going by using outsourcing for years and years! People aren't dumb!

- anon13736
15
Outsourcing is a short term profit maker. Eventually, people will get fed up with poor customer service and seek out companies that actually care about long term relationships with their customers.
- anon13668
11
Outsourcing may prove highly beneficial for many companies. This is very much true, but many people do not understand this.
- anon10195
10
What does outsourcing mean in the short run?
- anon10026
8
Who was US president when US started outsourcing?

Thanks

- anon8322
6
nothing is more annoying than calling and getting someone who is hard to communicate with. although i have to say that sometimes, native english speakers can be just as difficult sometimes. i remember when customer service was such a big deal with companies. they actually took pride in providing excellent customer service. now, everyone wants everything so cheap, this is what we as customers have to give up. i guess you can't have it both ways!
- olittlewood
4
I have a question based on payroll...How is the payroll process with outsourcing? I'm currently working as an outsource cutter for a company and when it comes to payday it's mayhem! I always get excuses that I have to wait weeks. They said I'd get paid bi weekly by mail and it's been a month and I've only gotten one check from the company. Is this process credible? or are they just taking their time to pay me? I'd like to know because I'd like to get paid for my work, if not I can move on.

Thanks

- sheka
3
How many newspapers use call centers?
- anon4503

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Last Modified: 16 November 2009

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