Outsourcing

Outsourcing entered the business lexicon in the 1980s and often refers to the delegation of non-core operations from internal production to an external entity specialising in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labour, capital, technology and resources.

Though often used interchangeably, outsourcing differs from offshoring in that outsourcing is relative to the restructuring of the firm while offshoring is relative to the nation (see below). Fundamentally and historically, outsourcing is a term relative to the organisation of labour within and between societies.

"Outsourcing" involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different than traditional relationships between buyer and seller of services in that the involved economic entities in an "outsourcing" relationship dynamically integrate and share management control of the labour process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services.

Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Consequently, a debate has ensued concerning the benefits and costs of the practice as well as how to categorize it as a phenomenon!

For the rest of the Wikipedia entry on the above term, go here.

In this 1 hour lecture, Prof. Strassmann will show results of his studies over the last ten years which have demonstrated that outsourcing does ... all, not consistently deliver lower costs and increased profitability.