Question

Write short note on the following:
Outsourcing

Answer 1

Outsourcing: Outsourcing is the process of contracting a business function to specialized agencies. In doing so, the company benefits in two ways:

1. It reduces its own cost.
2. It uses the expertise of the firm which specializes in a particular kind of service.

Generally, companies outsource their non-core areas. For example, in many corporate organizations, hospitals, etc., the canteen and sanitation services are usually outsourced to contractors. The contractors enter into an agreement with the company to provide the service. The waiters at the canteen or sanitation workers are not employees of the company but work directly under the contractor. The company makes payments to a contractor, who in turn pays his employees.

Another example of outsourcing is seen in weddings. The wedding planner outsources all services, such as decoration, catering, band, etc., to providers who are experts in these areas.