What is outsourcing?

What is outsourcing?

Outsourcing is giving part of one’s own work (for example from a company) to another company or individual, who will then do those tasks.

For example: A shoe manufacturer wants to create a software with which they can improve their shoe manufacturing process and streamline their selling activities.

A shoe manufacturing company most probably does not have a software development team in-house. So instead of acquiring this knowledge, which might take months and years to do so, they would engage an IT outsourcing company. This outsourcing company would develop the software for the shoe manufacturer and also maintain it.

Here some advantages of outsourcing (with the shoe manufacturer/ IT outsourcing example in mind):

1) Expertise: The IT outsourcing company might already have implemented this kind of software in other shoe manufacturing companies and therefore knows the potential pit falls and best practices, when implementing this kind of software in this kind of industry.

2) Focus on core activities: Today’s economies and industries are highly competitive. It is not possible to excel at different activities. A shoe manufacturer wants to focus on designing and creating the greatest shoes which are there out in the market. So they will give their software process to another company, who in return are the best at providing these software services.

3) Flexibility: The shoe manufacturing company might not need to have a big software development team for many years. They might only require them to build and implement the software and after that they could finish off the contract and get some kind of maintenance contract with the software company. This gives the shoe manufacturer more flexibility. Especially in developed countries in Western Europe it is not easily possible to hire full time employees and then let them go after a few months. They might pay the outsourcing company a little bit higher fee, but for that they will have the flexibility to end the contract after a certain time period.

Credit: Sascha Thattil

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