Question

How does outsourcing represent a new mode of business?

Answer 1

Outsourcing refers to the process of contracting out less important (i.e., non-core) business activities to external agencies. These external agencies are highly specialised and enjoy expertise in specific business activities such as advertisement and promotion of products and post-sale services. The basic rationale behind outsourcing is that it allows a company to focus on its core functions while leaving less important activities to specialised agencies. Thus, we can say that outsourcing increases a company’s efficiency in performing its important or core activities and reduces the overall cost of production.

It is owing to these benefits associated with outsourcing that it has become an emerging trend among business houses. Outsourcing has clearly redefined the way businesses are run. In addition, today, consumers are well informed, well educated and discerning, and are aware about all types of products. This has made industries focus on research and development for the continuous innovation of sophisticated products, increasing their need to outsource less important functions. Research has led to the development of better products for consumers, along with round-the-clock customer care services. Hence, it can be said that outsourcing has emerged as a new facet of business.