Outsourcing

Also called: outsourcing

Outsourcing or outsourcing is having business activities performed by an external company or supplier. The decision not to perform a particular activity internally with in-house employees is usually strategic. The outsourced activities are almost always business support activities or ancillary activities.

Possible reasons for choosing outsourcing:

• Cost savings through increased efficiency;
• Higher quality by hiring specialist company;
• Greater flexibility than with an in-house department;
• Being able to focus more on core activities themselves;
• Improve liquidity through disposal of machinery, housing.

Of these arguments, cost savings is the most common. In addition to the fact that an external supplier can often work more efficiently, savings are often made because they can apply different terms and conditions for executive personnel. This is especially true when outsourcing abroad (offshoring). An example is outsourcing call centers and production facilities to countries with lower wages.