Outsourcing

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Overview

Outsourcing by companies located in the United States has reached record levels. The definition of outsourcing is to subcontract a job to another person or company. Most of the time, modern terminology means that jobs, which were in the United States, are being outsourced to overseas firms where the same work can be done at a lower cost. Corporations who outsource often see a higher profit on their bottom line.

Outsourcing doesn't just involve tangible products or goods. It also involves transferring the management of day-to-day execution and oversight of entire business functions to a long-distance, external service provider. The two participating organizations in an outsourcing agreement are called the supplier and the client organization. Together, they both enter into an agreement that defines and sets boundaries on the services being transferred.

Outsourcing opportunities are provided by many different individuals and companies. The company will depend on the type of outsourcing skills that are required. For example, small companies will often outsource for accounting or legal assistance. Large corporations may outsource large portions of their corporate workforce. This includes call center, customer service, or information technology support, hiring, legal, and even employee food services. There are many major players in the outsourcing industry including Acxiom, CSC Outsourcing, Accenture Outsourcing Services, Mindreach Consulting, and more.

How it Works

In case a company cannot handle its activities or tasks, which can no longer be handled in-house, the company looks for service from third party firm instead of hiring employees to do the task. After experimenting with a host of prospective third party firms, the company settles down to outsource the project. Once the outsourced firm successfully clears the transition phase, the host company can look in for a long term contract.

Through that agreement, the supplier acquires the means and rights of product from the client. This takes place with the client transferring the assets, supplies, need for staff, and other resources to the supplier. For their part, the client agrees to obtain services from the supplier in accordance with the terms of the contract that was agreed upon by both parties.

Popular business segments that are commonly outsourced include human resources, accounting, information technology, and real estate management. More often, many companies are also making the decisions to outsource customer service support, call center functions like telemarketing, ghostwriting, web development, writing and manufacturing, and more.

Benefits

The chief benefit to the company is cost containment. Many corporations find it to be less expensive to outsource part of its operations to other countries. Through outsourcing opportunities, the company may be able to tap in knowledge or experience that is outside the scope of its normal operations. The result is an increase in profits, business value, business performance, level of quality, productivity, and much more. Most host companies have enough time to concentrate on their core business and also benefit from tax plans.

Costs

Costs of outsourcing depend on the type of resources required or the type of work being outsourced. There can be outside consulting fees, costs to relocate key employees or supervisors, and regulatory or administrative costs.

Timing

Outsourcing should be considered anytime a company needs expertise in a certain area. Large corporations may want to consider outsourcing anytime they want to expand their profit margin or improve the corporate bottom line. Also, the turnaround time of services or products to clients can be minimized.

Last Updated: December 19, 2011
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