So what is the definition of outsourcing? It is basically the practice of contracting tasks or functions to a third-party provider. Companies are not the only ones that outsource-individuals do it, too. When homeowners hire professionals (like plumbers, gardeners, and handymen) to do work for them, they are basically outsourcing. They tap into the expertise of others to get something done. The same thing goes with businesses; the only difference is that those contracted are more than just home improvement jobs. Companies outsource those tasks traditionally handled in-house. These include web design and development, payroll processing, content management and contact center services, among others.
The definition of outsourcing needs to be clarified because the word is often considered to mean something else. Outsourcing gets a bad reputation because people confuse the word with ‘offshoring.’ What everyone needs to understand is that outsourcing is not really the same as offshoring; the latter refers to the contracting of in-house jobs overseas. On the contrary, outsourcing may or may not occur outside the country. For instance, some businesses outsource certain processes to local third-party workers.
Outsourcing and offshoring are two words often interchanged, but are quite different from each other. Recently, these words became hot topic as both politicians running for office for the 2012 U.S. Presidential Election debated about them. Mitt Romney was attacked for his stance on outsourcing, which critics thought to be the same as offshoring. So how do these two differ?
Outsourcing and offshoring are similar in the sense that both involve the movement or transfer of responsibilities. However, they are made different by where the responsibilities are moved or transferred.
With outsourcing, activities or tasks are contracted to a third party provider or vendor. One simple example of outsourcing is when an individual hires a professional to do work for him or her, such as plumbing repairs and yard maintenance. In this case, the individual outsources the job because a specific skill set or expertise is required. However, for businesses, the move is often to save money and free up some time for core competencies. Services outsourced by companies include software management, payroll processing and bookkeeping.
Meanwhile, offshoring is basically outsourcing overseas. Outsourcing can take place either in the company’s country of origin or abroad. Outsourcing only becomes offshoring if the service provider or vendor chosen is located in a different country.
Outsourcing has a bad reputation because many individuals assume that all kinds of outsourcing involve the shipment of jobs overseas. This is why Romney was criticized-Americans thought he supported the move that cost countless people their jobs. With more companies offshoring (and therefore bringing their business outside the country), more and more Americans find themselves unemployed. In reality, many companies outsource within the country, if not their own state.
What people have to remember about outsourcing and offshoring is this: all cases of offshoring is outsourcing, but not all instances of outsourcing is offshoring.
Outsourcing has become popular in recent years because it helps companies stay competitive. Outsourcing not only significantly decreases expenses, but also improves efficiency and boosts productivity. Now you know the definition of outsourcing, and find that it is not exactly a bad thing. Learn more about IT Consulting Services here.
