Outsourcing is a business practice in which one company hires another company to perform services or create goods that were traditionally performed in-house by the companys own employees and staff. Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses, and risk. Outsourcing can help businesses reduce labor costs significantly. When a company uses outsourcing, it enlists the help of outside organizations not affiliated with the company to complete certain tasks. The outside organizations typically set up different compensation structures with their employees than the outsourcing company, enabling them to complete the work for less money. This ultimately enables the company that chose to outsource to lower its labor costs.
Outsourcing can affect a wide range of jobs, ranging from customer support to manufacturing to the back office. Many businesses have successfully adopted outsourcing processes into various aspects of their logistics and supply chain operations. Some small business functions that can be easily outsourced include IT management, sales, and human resources. However, outsourcing can produce challenges and drawbacks for companies, and sometimes there are problems with the outsourcing agreements, because of the pressure to bring jobs back to their home country, or simply because it has stopped being profitable.
