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What Is Outsourcing?

Outsourcing became quite the buzz word of the new economy. In the face of stricter competition and a need to deliver quality goods and services faster and at a lower price, companies started to focus on their “key business” and then contract other organizations to handle support functions. For example, it is now common for a company to outsource call center services and payroll. It is more cost efficient for them to pay another group than to hire a department, provide them with room and equipment, or invest in necessary training and human resource development. It also limits the company’s risk; It can cut back on those departments during lean times, or expand them during growth spurts, with something as simple as signing or ending a contract.

Aside from the convenience, outsourcing can also save the company a lot of money. It doesn’t have to pay for worker benefits, and it can choose among several outsourcing agencies to see has the best offer. Or, even if outsourcing comes out at the same price, companies feel that they are earning by avoiding “opportunity cost.” Instead of trying to buiid those departments, they can now focus on key issues that have direct impact on profit or market share.

Outsourcing also removes unnecessary layers in the company that can slow it down. It can also allow management to expand in another country or into a new market without having to actually relocate the entire business. It can, for example, maintain presence in that region through an outsourcing firm, and then send a skeletal crew of managers or trainors.

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