Outsourcing

What is Outsourcing

Definition

Outsourcing is defined as:

(1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations.

(2) Contracting with organizations outside your country for work that could otherwise be done by employees within your company.

Outsourcing has primarily come up because of the improvements in technology and connectivity as well as the development in the telecommunication industry.

Initially, when outsourcing started companies gave operational tasks that were of less strategic importance to their company to the providers. But, over time, the companies have gone ahead and formed strategic partnerships with the providers.

Types

Depending on the location of the outsourcing, there are different types of outsourcing that can be considered.

Onshore outsourcing or homeshoring:

When work is outsourced to a company within one’s own country, then it would be termed onshore outsourcing e.g. a company in USA contracts work to another company in USA itself.

Nearshore outsourcing:

When work is outsourced to a company near one’s country’s borders, then it is called Nearshore outsourcing e.g. when a company in USA contracts work to Canada.

Offshoring or offshore outsourcing:

When work is contracted to companies in distant locations e.g. India, China etc, then it is called Offshoring.

Bestshore outsourcing:

When work is contracted to a “shore” based on parameters like communication, productivity and costs.

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