Delegation of non-core operations

Outsourcing often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. 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 business, or to make more efficient use of worldwide labor, capital, technology and resources.

Though often used interchangeably, outsourcing differs from offshoring in that outsourcing is relative to the restructuring of the firm while offshoring is relative to the nation, though the two are not mutually exclusive, especially under conditions of globalization. Offshoring describes the relocation of business processes from one country to another.

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, manufacturing and engineering.

The economic logic of outsourcing is to reduce costs. India’s specialized skills are more economically viable and hence they have the competitive edge over their counterparts in western countries. The concept is that countries should freely trade the items that cost the least for them to produce.

Many organizations today are making the decision to outsource. In today’s global marketplace, outsourcing has made itself accessible to many organizations on a national and international level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs in developing countries. Outsourcing is also successful in increasing product quality and substantially lowering firm and consumer costs. Outsourcing allows for lower costs, productivity increases, which benefits the economy in the aggregate. Countries, such as China and India benefit from the patronage of companies that outsource to them - in terms of increased wages, employment, and quality of life.