Outsourcing Basics
Outsourcing is the practice by which one business subcontracts services or products from another business. When products or services are outsourced, the process of their production is transferred to the subcontractor. There are pros and cons to this relationship - a business can realize significant cost savings, but a poorly managed relationship can cause quality and scheduling problems.
Outsourcing may refer to work assigned to a nearby, local contractor or a contractor in another country (also called Offshoring).
Outsourcing is not a new phenomenon. Even thousands of years ago, kings hired mercenary soldiers or foreign armies to fight for them by augmenting or even to replacing their national army. In modern times, businesses hire outside companies to do work that they used to do internally in much the same way (although the battle is for profit these days).
Quotes
"Most of the research and paperwork for large American corporates are being done in India."—Russell Smith, President and Chairman of SDD Global SolutionsThe Hindu Business Line: US corporates outsource legal work to India (June 16, 2007)
"Contrary to the popular angst that "our best jobs" are going overseas, the best jobs appear to be staying here...Just as the free traders predict, we are swapping less skilled and lower paying jobs for relatively higher skilled and better paying jobs."— Dan Griswold, Center for Trade Policy Studies, Cato Institute Free Trade Bulletin: Why We Have Nothing to Fear from Foreign Outsourcing (March 10, 2004)
Outsourcing Background
Outsourcing Satire and Humor
The Internet Weekly: Outsourcing Satire, Photo Cartoon and Humor Archive
The Onion News Network: Many U.S. Parents Outsourcing Child Care Overseas (Time 01:21)
YouTube: The Simpsons: India Outsourcing (Time 07:28)
MetaCafe: Burger King Outsourcing (Time 02:50)
Information Technology Blog: IT Outsourcing Humor (2006)
U.N. Observer: "U.S. Outsourcing the Presidency (Satire?)" (2006)
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References
Fast Facts
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Responsibility for production is transferred to the subcontractor.
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Can greatly lower production costs and decrease time to market.
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Can reduce quality or increase delivery time if not managed properly.
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Increased free trade allows for more outsourcing
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"Outsourcing" became part of business vocabulary and practice during the 1980s
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"Offshoring" refers to outsourcing to companies located abroad
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Outsourcing can be done to almost any business process including manufacturing (hard goods or IT systems), customer and technical support, accounting and payroll services (very commonly done by small businesses), recruiting, sales lead generation, data entry, and many more.
