A Resurgence of Outsourcing

The word “outsourcing”, in some instances, has a bad connotation, but for many it means being able to compete with other companies worldwide. The most basic method of outsourcing is using an external service provider to perform functions that the company does not want to perform itself. There are many ways that this can be done and not all of them mean sending business overseas.

There are two different types of outsourcing: onshore and offshore. When Company A has Company B, which is in their same country, complete the service, which is onshore outsourcing. Offshore outsourcing has two types, nearshoring and farshoring. For any company that is outsourcing to a company that is geographically close to them, but not in their country, they are nearshoring. Farshoring would be using a company that is not geographically close to them.

A company of any size can outsource. There are two sides to outsourcing—a service provider and a service buyer. To help companies find other companies for outsourcing the International Association of Outsourcing Professionals (IAOP) generates a list of the best services providers.

There is not an ideal way of outsourcing for any company. By looking at all the possibilities, finding the right solution for their company is possible, but first we need to know why a company outsources. The main reason is to reduce operating cost, but other reasons include assess to new skills or technology, and to make global operations more effective.

Companies that choose to outsource services are typically outsourcing IT, human resources, finance and accounting, procurements and facilities management. The biggest of those services outsources is IT. Many times the company providing the IT services has technologies that midsize to smaller companies do not have the money to invest in, and it make more economical sense to outsource it to a company that has the technology already.

Outsourcing in some aspect will continue into the future. There have been predictions that offshoring will continue to increase. With the increase of unemployment, many companies are looking at different cities in the US for outsourcing, but with wages still cheaper in other countries, outsourcing will be here to stay.

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