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.
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