Over the course of his career, corporate services executive Ashok Bagdy has fielded numerous questions regarding the nature and benefits of outsourcing. Here, he presents a brief primer on the practice.
By definition, outsourcing involves the hiring of an outside company to handle certain areas of a company’s operations. Outsourcing can save a company significant amounts of money on payroll while relieving company personnel of time and resources that can then be applied to more pressing issues. In addition, companies hired to perform outsourcing services often use specialized expertise and technology in their fields.
Manufacturing and supply chain processes are perhaps the most common outsourced area. Many companies hire outside firms to manufacture a particular part, and another company with transportation expertise then brings that part to the hiring company’s plant, where it becomes part of the finished product.
Accounting, information technology, and customer service departments may also be outsourced to a company that specializes in those areas. Since a company who outsources will pay for services rendered, this allows for more flexible and efficient budgeting.