Outsourcing: a primer

Abstract

Outsourcing is defined as the procurement of products or services from sources that are external to the organization. Firms should consider outsourcing when it is believed that certain support functions can be completed faster, cheaper, or better by an outside organization. Tasks that are not core competencies of the organization are candidates for being contracted out. However, any skill or knowledge that allows you to serve your customer base better, that deals directly with the product or service you are trying to put out of the door, is one that must remain in‐house. Today, the outsourcing of selected organizational activities is an integral part of corporate strategy. For corporations, benefits of outsourcing are substantial: reduced costs, expanded services and expertise. Outsourcing allows companies to refocus their resources on their core business. Corporations can buy technology from a vendor that would be too expensive for them to replicate internally. For outsourcing to be successful the decision needs to be an informed one. Effective management of the outsourcing relationships is an organizational imperative.