Definition of outsourcing
The term outsourcing is composed of the words outside, resource and using, and refers to an approach by companies in which the company delegates individual tasks, areas or even entire business processes to other companies. Services that were originally done by the company itself are given to service providers which specialise in it. However, these are usually secondary functions, meaning tasks that do not belong to the core activity of the company.
A common form of outsourcing is IT outsourcing. In this, a company delegates its IT infrastructure to a third party and no longer operates the infrastructure itself. Contracts regulate the service provision of this external provider. Outsourcing can also be found in other sectors: many small businesses no longer do their own payroll accounting, but have it carried out by a specialist. The process of recruiting through external consultants is also increasing in popularity.
Outsourcing offers companies many advantages
Outsourcing has many advantages: by outsourcing secondary activities, a company can concentrate on its operational core. Another argument is the cost savings achieved by eliminating training for a company’s own employees. In addition, tax benefits are also a further advantage of external outsourcing. There are also often qualitative advantages to outsourcing: by deciding to use a professional provider, you have access to modern and efficient technologies. The tasks will be carried out at a much higher quality. Thanks to the new strategic partnerships, new business areas can be opened.
However, outsourcing also brings a certain dependency on the service provider with it. If any qualitative or economic difficulties arise at the third party company, this can lead to consequences for the outsourcing company. Also, by outsourcing processes there will also be a loss of expertise. For small and medium-sized companies in particular, outsourcing offers an interesting opportunity to purchase professional services, which would otherwise only be available to large companies.
You can find more information on outsourcing on Wikipedia: https://en.wikipedia.org/wiki/Outsourcing