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Hub AI
Outsourcing AI simulator
(@Outsourcing_simulator)
Hub AI
Outsourcing AI simulator
(@Outsourcing_simulator)
Outsourcing
Outsourcing is a business practice in which companies use external providers to carry out business processes that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another.
The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to the economic and cultural collapse of small, industrial towns. In some contexts, the term smartsourcing is also used.
The concept, which The Economist says has "made its presence felt since the time of the Second World War", often involves the contracting out of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call center support.
The practice of handing over control of public services to private enterprises (privatization), even if conducted on a limited, short-term basis, may also be described as outsourcing.
Outsourcing includes both foreign and domestic contracting, and therefore should not be confused with offshoring which is relocating a business process to another country but does not imply or preclude another company. In practice, the concepts can be intertwined, i.e. offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing.
Global labor arbitrage can provide major financial savings from lower international labor rates, which could be a major motivation for offshoring. Cost savings from economies of scale and specialization can also motivate outsourcing, even if not offshoring. Since about 2015 indirect revenue benefits have increasingly become additional motivators.
Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process". Details of managing DuPont's chief information officer Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Accenture were outsourced, thus avoiding "inventing a process if we'd done it in-house". A term subsequently developed to describe this is midsourcing.
Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses, and risk.
Outsourcing
Outsourcing is a business practice in which companies use external providers to carry out business processes that would otherwise be handled internally. Outsourcing sometimes involves transferring employees and assets from one firm to another.
The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to the economic and cultural collapse of small, industrial towns. In some contexts, the term smartsourcing is also used.
The concept, which The Economist says has "made its presence felt since the time of the Second World War", often involves the contracting out of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call center support.
The practice of handing over control of public services to private enterprises (privatization), even if conducted on a limited, short-term basis, may also be described as outsourcing.
Outsourcing includes both foreign and domestic contracting, and therefore should not be confused with offshoring which is relocating a business process to another country but does not imply or preclude another company. In practice, the concepts can be intertwined, i.e. offshore outsourcing, and can be individually or jointly, partially or completely reversed, as described by terms such as reshoring, inshoring, and insourcing.
Global labor arbitrage can provide major financial savings from lower international labor rates, which could be a major motivation for offshoring. Cost savings from economies of scale and specialization can also motivate outsourcing, even if not offshoring. Since about 2015 indirect revenue benefits have increasingly become additional motivators.
Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process". Details of managing DuPont's chief information officer Cinda Hallman's $4 billion 10-year outsourcing contract with Computer Sciences Corporation and Accenture were outsourced, thus avoiding "inventing a process if we'd done it in-house". A term subsequently developed to describe this is midsourcing.
Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses, and risk.