History of Outsourcing work – Many organizations today are making the decision to outsource. In today’s outsourcing work global marketplace outsourcing has made itself accessible to many organizations on a national and international level. Outsourcing refers to getting things done from out – house instead of getting them done in – house. History of outsourcing is as old as the history of mankind. Since the individual started to form groups, small communities, and societies, the outsourcing began. The decision to outsourcing work is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labor, capital, technology and resources. Fundamentally outsourcing is a term relative to the organization of labor within and between societies.
Outsourcing – Outsourcing involves transferring or sharing management control and / or decision – making of a business function to an outside supplier, which involves a degree of two – way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different from traditional relationships between buyer and seller of services in that the economic entities involved in an “outsourcing” relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services. Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions.
Benefits of Outsourcing – Outsourcing, as the term is typically used in economics, is not necessarily a job destroyer but rather a process of job relocation and may not impact the net number of jobs in a nation or in the global economy. Outsourcing is also successful in increasing product quality and / or substantially lowering firm and consumer costs (e.g., increases the quality to cost ratio). Because outsourcing allows for lower costs, even if quality reduces slightly, this is sometimes the case, productivity increases, which benefits the economy in the aggregate. Two of the major advantages that today’s organizations can expect to obtain through outsourcing include the ability to purchase intellectual capital and to lower costs. Overall outsourcing is viewed for its
Economics
Quality of Service
Distribution of Workload
Cost Effective / Cheap labor
Productivity
Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services or rather a process of job relocation with a basic need of improving the bottom line of the concern company. Outsourcing can also present advantages to “Developing” countries and benefits from the patronage of companies that outsource to them – in terms of increased wages, job prestige, education and quality of life. Outsourcing is a form of international trade.
The most common reasons why companies decide to outsource include cost reduction and cost savings, the ability to focus its core business, access to more knowledge, talent and experience, and increased profits.
Further, the label outsourcing has been found to be used for too many different kinds of exchange in confusing ways. For example, global software development, which often involves people working in different countries, it cannot simply be called outsourcing. The outsourcing-based market model fails to explain why these development projects are jointly developed, and not simply bought and sold in the marketplace. Recently, a study has identified an additional system of governance, termed algocracy, that appears to govern global software projects along side bureaucratic and market-based mechanisms. The study[24] distinguishes code-based governance system from bureaucracy and the market and underscores the prominent features of each organizational form in terms of its ruling mechanism: bureaucracy (legal-rational), the market (price), and algocracy (programming or algorithm). So, global software development projects, though not insourced, are not outsourced either; rather, they are developed together where a common software platform allows different teams around the world to work on the same project together.