CASE #4

Outsourcing-often refers to the process of contracting to a third-party. While outsourcing may be viewed as a component to the growing division of labor encompassing all societies, the term did not enter the English-speaking lexicon until the 1980s. Since the 1980s, transnational corporations have increased subcontracting across national boundaries. In the United States, outsourcing is a popular political issue.

A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function - commonly one previously performed in-house - to an external provider. In this sense, two organizations may enter a contractual agreement involving an exchange of services and payments. Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing (which are odd terms because doing business with another country does not mean you have to go offshore In addition, several related terms have emerged to grasp various aspects of the complex relationship between economic organizations or networks, such as nearshoring, multisourcing and strategic outsourcing. Almost any conceivable business practice can be outsourced for any number of stated reasons. The implications of outsourcing objectively and subjectively vary across time and space.

Advantages and Disadvantages of Outsourcing:

Advantages of Outsourcing:

The benefits of outsourcing are:

Less capital expenditure - For example, by outsourcing information technology requirements, a company does not have to buy expensive hardware and software.

Less management headache - For example, by outsourcing business process such as accounting, a company no longer has to hire and manage accounting personnel.

Focus on core competencies - Outsourcing non-core related processes will allow a business to focus more on it's core competencies and strengths, giving it a competitive advantage.

Disadvantages of Outsourcing

Before deciding on outsourcing your company's business process, keep in mind the disadvantages of outsourcing:

Less managerial control - It may be harder to manage the outsourcing service provider as compared to managing your own employees.

Outsourcing company goes out of business - If your outsourcing service provide goes bankrupt or out of business, your company will have to quickly transition to a new service provider or take the process back in-house.

May be more expensive - Sometimes it is cheaper to keep a process in-house as compared to outsourcing.

Security and confidentiality issues - If your company is outsourcing business processes such as payroll, confidential information such as salary will be known to the outsourcing service provider. ( ICTSTANDARDS.com )

Implication of Outsourcing:

Based on my understanding about Outsourcing, it is very important in terms of business. It is also great opportunity especially for the individuals who are lucky to have the job and its more advantageous for the company who is doing this kind of strategy. Let me define outsourcing first. It is getting resources or human resources outside the company or outside the country that the company is based on. The company or firm choose to have outsourcing as one of their strategies because it is very obvious especially for Internet marketing companies and manufacturing companies to work on this kind of tactic because it is cheap. The firm responsible chooses a country where they can find cheap raw materials for the product that they are making. Make sense? For web publishing or Internet marketing, when you are seeking for a human resource that will help you in creating and managing your website, what will you choose? The ones who are far from you but cheap or the ones who are near you but are very expensive. You see, to outsource a human resource, for example a writer, in the Philippines or India costs lesser than to hire a writer which is based in California. And the great thing is that, somehow Asian writers are more proficient in the English language compared to others.