Frequently Asked Questions |
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| 1. | What is outsourcing? | |
| Outsourcing takes place when an organization transfers the ownership of a business process to a supplier. The key to this definition is the aspect of transfer of control. This definition differentiates outsourcing from business relationships in which the buyer retains control of the process or, in other words, tells the supplier how to do the work. It is the transfer of ownership that defines outsourcing and often makes it such a challenging, painful process. In outsourcing, the buyer does not instruct the supplier how to perform its task but, instead, focuses on communicating what results it wants to buy; it leaves the process of accomplishing those results to the supplier. | ||
| 2. | What is the purpose of outsourcing? | |
| Outsourcing, once used mainly for downsizing and cost reductions at major corporations, is becoming a strategic tool that has a powerful impact on corporate growth and financial stability. More companies than ever before are establishing strategic partnerships that give them access to specialized expertise in critical business functions. | ||
| 3. | Is "contracting" or "contracting out" just different terminology for "outsourcing"? | |
| These two terms are often confused, but they are not the same at all. Contracting is when a company (buyer) purchases goods or services from another company (supplier or vendor). In this situation, the buyer "owns" and controls the process. In other words, the buyer tells the supplier exactly what it wants and how it wants the supplier to perform those services. The supplier cannot vary from the buyer's instructions in any way. The buyer can replace the supplier quite easily by breaking the contract.
In outsourcing, the buyer turns over the control ("ownership") of the process to the supplier. The buyer tells the supplier what results it wants the supplier to achieve, but the supplier decides how to accomplish those results. In outsourcing, the supplier has expertise in a certain process (such as desktop, or human resources, or logistics, etc.), and it has economies of scale. If the buyer were to dictate to the supplier how to do the job (as happens in contracting), the buyer would be destroying an important aspect that makes outsourcing work - the value that is created by using the supplier's expertise and economies of scale. Telling the supplier how to do the job also eliminates accountability on the part of the supplier, and this is an important element in successful outsourcing relationships. To further explore job or business opportunities, talk to us now. |
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