by Justin Manucci

Created on: December 15, 2010

Outsourcing is a business function that has become increasingly popular in the United States in recent years, and is actually a huge destruction to our economy. The definition of outsourcing is the arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house. This is something that is particularly popular with customer service, information technology, and more business sectors. The most popular business functions outsourced, from most often to least often include information technology, human resources, facilities management, finance and accounting, and marketing and sales. The top reasons why companies tend to outsource, from most popular to least popular include, to tap outside resources of expertise, to concentrate resources on core business functions, to reduce head count and related expenses, to eliminate the need to reinvest in technology, to reduce costs, and to better manage the costs of internal processes. Surprisingly, most people would think that reduce costs would be first on this list, as its why many companies outsource manufacturing and customer service to third world countries, but it is actually the fifth reason why companies tend to outsource a particular business function.

There are actually a few different types of outsourcing, which many people probably don’t even realize exist. The first type of outsourcing is onshore outsourcing. Onshore outsourcing is the process of engaging another company within the same country for services. An example of this would be GSI Commerce. Companies can hire GSI Commerce to run the entire website, and online shopping experience for them, including web development, sales, customer service, and more. Another type of outsourcing includes near shore outsourcing, which is contracting an outsourcing arrangement with a company in a nearby country, typically seen with a company with a border nearby. The third kind is offshore outsourcing, which is extremely common in today’s news, as its talked about quite a bit, especially in politics. Offshore outsourcing is using organizations from developing countries to write code and develop systems. Typically in offshore outsourcing, the company is far aware from the “headquarters”.

Benefits of outsourcing include:

1.)    Increased quality and efficiency of a process, service, or function

2.)    Reduced operating expenses

3.)    Resources

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