Definition of outsourcing
Outsourcing is becoming a common development between specific industries and services. Outsourcing can be defined as the outsourcing of a service to an external company to provide a service that could otherwise be performed by internal workers. Simply put, outsourcing refers to the transfer of a business function or service to an external service provider.
Many large and medium-sized companies are becoming increasingly involved in outsourcing as the years go by. An example of outsourced jobs are call centers that offer services like technical support, credit cards, medical transcription, and even bill payments. These third-party companies handle different jobs or offer the same service but serve a wide range of clients. Most of these jobs are located abroad or offshore and are typically in developing countries.
Outsourcing has only recently been used for a host of specialized services, but outsourcing itself has been around for a long time. Specific specialized services, such as company payroll, billing, and data entry, are outsourced to make these services more efficient. Specializing in a specific process not only makes the service more efficient, it also makes it more profitable. Lower operating costs and specialized services are some of the main reasons why foreign companies turn to outsourcing.
Companies have many reasons to outsource their services to other countries, but one of the main reasons they do so is because they save a lot of time and money, which is perhaps the most important aspect of all. One of the reasons companies want to outsource to developing countries is because payroll and benefits are not that expensive compared to the main location.
The minimum wage for an employee in the Philippines is nowhere near the minimum wage that an employee must pay in the United States. Benefits like health care, bonuses and salaries cost much lower if you outsource to developing countries than if you use them in the original company location.
Information technology outsourcing and business process outsourcing are perhaps the two most popular types of the various forms of outsourcing. Outsourced information technology services often mean the transfer of labor related to computing and the Internet.
On the other hand, business process outsourcing involves call center outsourcing, human resources outsourcing, investment and accounting outsourcing, and claims processing outsourcing. IBM and Accenture are just a few of the largest companies involved in business process outsourcing.
Outsourcing also has its downsides, like many other business models. One of the disadvantages is the breakdown of direct links between the company and its client. Services like customer care are one of the highest priorities in outsourced services today. Another downside to outsourcing is the loss of jobs in developed nations because jobs and opportunities are disappearing abroad.