Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company. These services were traditionally performed in-house by the company’s own employees and staff. Companies normally use this practice to cut costs, as it can help businesses reduce labor costs significantly. As such, it can affect a wide range of jobs, ranging from customer support to manufacturing to the back office. Therefore, an outsourcing strategy also helps companies to better focus on the core aspects of the business.
The outside company, which we also call the service provider (or a third-party provider), arranges for its own workers or computer systems to perform the tasks or services either on site at the hiring company’s own facilities or at external locations.
Companies often outsource information technology services. For example, programming and application development, as well as technical support. In addition, they frequently outsource customer service and call service functions and other types of work. Such as, manufacturing processes, human resources tasks and financial functions, like bookkeeping and payroll processing.
On the other hand, outsourcing has some disadvantages as well. For example, communication difficulties between parties, security threats where sensitive data is increasingly at stake, and additional legal duties. In addition, the practice of outsourcing is subject to considerable controversy in many countries. This is due to the fact that outsourcing has the potential to disrupt a labor force. Robotics or precision machines have emerged at a greater scale, causing the loss of domestic jobs.
Check our webpage and learn more words from our glossary.
« Back to Glossary Index