Outsourcing is subcontracting a process, such as support, product design or manufacturing, to a third-party company. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular department or business unit, or to make more efficient use of labor, capital, technology and resources.
Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contractual agreement that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. 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 like telemarketing, customer service, market research, manufacturing, designing, web development, content writing, ghostwriting and engineering.
The decision to outsource is taken at a strategic level and normally requires executive and sometimes board approval. Outsourcing is the divestiture of a business function involving the transfer of people and the sale of assets to the supplier. The process begins with the client identifying what is to be outsourced and building a business case to justify the decision. Once a high level business case has been established for the scope of services will a search begin to choose an outsourcing partner.
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