outsourcing

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Outsourcing

Purchasing a significant percentage of intermediate components from outside suppliers.

Outsourcing

The practice of a company hiring a different company to supplement its services at a lower cost. For example, a company may outsource its accounting to another firm, which would then prepare and provide appropriate statements for the company. Likewise, an automobile manufacturer may buy auto parts from another company and use them to make its own cars. Companies outsource in order to reduce their costs and thereby reduce the prices they charge for their goods and services. The practice is somewhat controversial, especially as some companies in the developed world outsource to firms in other, often developing nations. Critics contend that this drives jobs out of the home country, while proponents argue that this benefits consumers.

outsourcing

the buying-in of components, finished products and services from outside the firm rather than self supply from within a firm. In some cases this is done because it is more cost-effective to use outside suppliers or because outside suppliers are more technically competent or can supply a greater range of items. For example, in 2000 the Bank of Scotland signed a 10 year outsourcing agreement with IBM which involves IBM taking over the Bank of Scotland's computer systems and operating them. The deal will enable the Bank of Scotland to ‘save’ up to £150 million on its information technology (IT) costs as well as being able to draw on IBM's expertise to create a more technically advanced IT infrastructure than it could have achieved on its own. On the debit side, however, reliance on outside suppliers may make the firm vulnerable to disruptions in supplies, particularly missed delivery dates, problems with the quality of bought-in components, and ‘unreasonable’ terms and conditions imposed by powerful suppliers. See SOURCING, INTERNALIZATION, MAKE OR BUY, VERTICAL INTEGRATION, VIRTUAL CORPORATION.

outsourcing

the buying-in of components, finished products and services from outside the firm rather than self-supply from within the firm. In some cases this is done because it is more cost-effective to use outside suppliers or because outside suppliers are more technically competent or can supply a greater range of items. For example, in 2000 the Bank of Scotland signed a 10-year outsourcing agreement with IBM that involved IBM taking over the Bank of Scotland's computer systems and operating them. The deal enabled the Bank of Scotland to ‘save’ up to £150 million on its information technology (IT) costs as well as being able to draw on IBM's expertise to create a more technically advanced IT infrastructure than it could have achieved on its own.

On the debit side, however, reliance on outside suppliers may make the firm vulnerable to disruptions in supplies, particularly missed delivery dates, problems with the quality of bought-in components, and ‘unreasonable’ terms and conditions imposed by powerful suppliers. The decision to produce internally or outsource will depend upon the combined production costs and TRANSACTION COSTS of the alternative supply source. See TRANSACTION, INTERNALIZATION, MAKE OR BUY, VERTICAL INTEGRATION.

References in periodicals archive ?
executives, when it comes to payroll services and payroll tax filing, the four most valuable services an outsourced solution can provide are filing tax forms with all federal, state and local agencies (44 percent), updates on compliance regulations (39 percent), payroll or ensuring payments are deposited on time, every time (30 percent), and processing or calculating tax liabilities and collecting funds (30 percent).
Figure 2: CALA domestic outsourced agent positions, 2005 - 2010
about their outsourced dining facilities, then get out a calculator and follow along: "Now we have a real food plan--before we just had a food service.
Cohen's 95-partner regional firm outsourced a few hundred tax returns to India in 2003 and 2004 but stopped because they didn't see it as terribly efficient.
Universal Leven, a Dutch insurance company established in 1997, didn't bother to build back-office capabilities--it merely outsourced them and focused management attention on market-facing, strategic activities.
RGA Technology Partners has outsourced some application development of noncore components and client-system integration of its software product, Automated Underwriting and Risk Analysis, to an offshore Indian firm.
Case reported that the company's sales and use tax function was outsourced to the field, allowing him to reduce a job requiring six or seven people to a job requiring only one person with oversight responsibilities.
Evaluate the total cost of the function, whether done internally or outsourced.
Transaction processing is the most outsourced administrative function.
Hechinger's has outsourced the entire corporate tax function; Montgomery Ward has outsourced most of its tax positions; and British Petroleum has outsourced a significant portion of its tax compliance work.
Applications development is touted as the most outsourced area in the financial services sector
In response to this demand, an abundance of external service providers are available in the marketplace today, ready to assume responsibility for providing needed services on an outsourced basis.