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What is Outsourcing

A common assignment on What is Outsourcing is as follows:

Outsourcing appears to be one of the terms whose meaning varies only slightly, if at all, in common business usage. The almost universally accepted definition is: the use of outside resources to perform activities traditionally handled by internal staff and resources.

What is Outsourcing

A 1998 survey of current and potential outsourcing end-users found that the top five reasons companies used outsourcing were (in rank order) to:

a) reduce and control operating costs;

b) improve company focus;

c) gain access to world-class capabilities;

d) free internal resources for other purposes; and,

e) secure resources not available internally.  The next five reasons were (in rank order) to:

f) accelerate reengineering benefits;

g) gain control of a difficult or out of control function;

h) make capital funds available;

i) share risks; and,

j) secure an infusion of cash. All of these reasons collectively have given significant impetus to the proliferation of outsourcing strategies, approaches and styles.

As early as 1991, a study of 1,005 companies by the international consulting firm Wyatt Company reported that 35% of American-owned firms surveyed had increased their use of outside vendors since 1986. By 1994, firms in the U.S. were outsourcing about $16 billion in goods and services according to the Outsourcing Institute, headquartered in New York, and by mid-decade outsourcing had gained even more ground.  A study by Arthur Andersen that year found that 85% of business organizations were outsourcing work they had previously performed in-house.

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