The procurement of a product or service from an outside company in order to cut costs.

Outsourcing makes sense to some people as it reduces cost (an easily measurable and quantifiable value) while often sacrificing quality, customer satisfaction, and/or employee morale (none of which are easily or accurately quantifiable).

Usually seen as a Bad Thing unless one is a bean counter or in administration.

See also Third Party Outsourcing.

Technology is always changing, and it can be very hard to keep up with it all. Outsourcing to companies that have the resources and desire to update their technological solutions can be a great advantage of outsourcing.

Outsourcing also allows the business to concentrate more on core business areas. Back office operations of a company require a lot of work. By outsourcing their back office operations, they can focus more on their core business areas.

By outsourcing, the company can get skilled manpower at affordable prices. This helps a company save on recruitment, training, and other human resource costs. This also means increased productivity. By employing skilled manpower in large numbers at lower costs, companies can increase their productivity. This would result in better customer satisfaction and increased profitability.

Although there are many advantages of outsourcing, there are also many disadvantages as well.

When a business uses outsourcing, they lose a lot of managerial control. It’s a lot harder to manage outside service providers than manage their own employees.

Often the hidden costs in outsourcing are difficult to calculate or prepare for. These include legal costs related to putting together a contract between two companies and the time spent coordinating the contract.

Another disadvantage of outsourcing is that it can be a threat to security and confidentiality. If the company is outsourcing processes like payroll, medical transcriptions or other confidential information, a company must be very careful in choosing which process it wants to outsource and to which provider.

If the outsourcing company goes bankrupt or out of business, the business will have to quickly find a new service provider or take the process back in-house.

There are a lot of good things about outsourcing, but it seems like there are so many things that could go wrong.

The business doesn’t have very much control over their outsourcing provider. I would find it so hard to trust the employees from the outsourcing company because there is no way to manage them efficiently.

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