What is outsourcing?

We explain what outsourcing is, the advantages and disadvantages of this business process. In addition, some examples and what is offshoring.

1. What is outsourcing?

It is known as  outsourcing  (neologism of English:  out , “outside” and  source , “source”), or as outsourcing, outsourcing or outsourcing, to the business process in which the fulfillment of certain internal tasks or services is derived to another organization , that otherwise it would be more expensive (in time or money) to assume.

Contracts  outsourcing  are assumed generally by companies subcontractors of services specialized in the areas most conducive to this: usually those that require a hyper -specialized knowledge  or a series of tools and resources that the contracting company does not have or You don’t want to have For example, the areas of computer science , human resources , asset management or accounting , technical support, engineering, etc.

Of course: the outsourced area cannot be central or nuclear in the business of the contracting company, and is usually based on regular contracts or tenders, held for a certain period of time. Not always that the services of an external company are contracted, we can talk about  oursourcing .

This practice is increasingly common in the business world , given the high level of diversification of organizational needs, and the huge inequalities between the economic regions of a globalized world. Thus, in many cases outsourcing represents a cost reduction that few companies can afford to refuse.

2. Advantages of outsourcing

Some of the advantages of  outsourcing  are the following:

• Cost reduction , especially when subcontracting to a small company or belonging to a poorer economy (exploitation). This affects greater profitability of the company.
• Greater effectiveness , since specialists in the specific area and subject that are wanted to attend are subcontracted, which frees the company from costs and training times, purchase of materials, etc. The  outsourcing  gives results much faster.
• Greater specialization , given that the subcontracted work is carried out according to the client’s needs , evaluating the conditions of each specific case.
• Lower risks , since it is enough to change the external service provider to change the strategy or the way in which the work is executed, instead of reformulating an entire area and having to incur layoffs, changes or incorporations.

3. Disadvantages of outsourcing

Some of the disadvantages of outsourcing are:

• Disrepute , in the case of the exploitation of underdeveloped economies to perform an expensive job at a much cheaper price, paying figures well below the considerable ethical. Outsourcing always incurs these risks.
• Lack of loyalty of the worker , since subcontracted employees do not receive their payment directly from the contracting company, but from the subcontracted one, so they do not necessarily feel part of the project in which they work.
• Worsening working conditions , since outsourcing is cheaper and more efficient, so many companies choose not to grow or not to incorporate new staff on a fixed basis (and with all its benefits of law), but to hire an  outsourcing  to do Work in a certain time.
• Loss of control , since the subcontracted company must be fully trusted. If this is from another cultural region, for example, problems of understanding may arise.
• F high exclusivity , by the subcontracted company, which can become episodes of fraud, industrial espionage, etc.

4. Outsourcing Examples

Examples of this practice are the order of the day. Many companies outsource  Community  Manager  (CM) services to carry their social networks , since their communications employees cannot dedicate the entire day to managing their Facebook and Twitter accounts, for example. This has created a large labor camp consisting essentially of young people.

The outsourcing market   is so varied and so rich that large companies such as Accenture, IBM, Sodexo, Hewlett Packard, Genpact and many others dedicate, apart from running their own business, a good amount of their efforts and their time to the services of outsourcing for other large and medium enterprises in various areas.

5. Outsourcing vs. offshoring

The term  or ffshoring  (from English:  off , “out” and  shore , “coast, border”) or relocation, as it is said in Spanish, is often used to distinguish certain cases of outsourcing in which a company from the company is outsourced from another country or another region of the world .

The purpose of this term is to distinguish the most problematic cases of subcontracting (either for ethical reasons or for specific risks that have to do with foreigners: lack of effective communication, geopolitical risk, etc.) from   daily outsourcing , since The latter occurs within the borders of the same country.