
What
it is:
Outsourcing is the process of contracting a portion of a company's
activities to third-party provider.
Outsourcing involves subcontracting parts of a company's value-chain,
(i.e. steps in the design, supply, production, marketing, and services
processes) to other companies or contractors that specialize in those
activities. Through outsourcing agreements, the client company hires separate
companies to perform specific tasks in the value-chain on its behalf.
Often, the work is performed under the name of the buyer.
The kinds of outsourcing work
performed vary widely across industry sectors. Some common outsourcing
activities include: human resource management, facilities management, supply
chain management, and service, marketing, computer aided design, research,
design, content writing, engineering, diagnostic services, and legal
documentation.
Why
it Matters:
The decision to outsource usually
stems from a focus on lowering costs and improving the efficient allocation of
resources within a company. Outsourcing allows a company to redirect its
attention to its own competencies and hire outside resources to handle other
tasks. However, outsourcing requires a high degree of equality and
management control in order to be successful.
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