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 ?
Netsourcing business applications provides organizations with the solutions they need to operate effectively while offering an increased availability of applications and an overall cost savings.
Intira's Netsourcing infrastructure consists of "lights out" data centers integrated into Intira's own nationwide broadband network, managed and monitored by Intira's automated service management centers.
Research firm The Yankee Group believes the netsourcing market will be worth $20bn by 2003.
Intira will provide the outsourced infrastructure services necessary to power the customers' complex applications, including designing, building, deploying and managing comprehensive integrated infrastructure solutions through its Netsourcing Services.
Lawson already has a significant presence as a solution provider to the insurance industry," said Vicki Griffith, director of Netsourcing, Lawson Software.
Intira Corporation is a pioneer and leader in Netsourcing -- the outsourcing of the IT and network infrastructure required to support complex, mission-critical e-business applications with high availability.
We have been using NSS NAS products as a front end to our Hitachi Data Systems Freedom SAN since the beginning of the year," said Albert Barajas, vice president of Engineering for S4R, a netsourcing service provider and Hitachi Data Systems customer.
We expect and illustrate in this Report that vendors will build more technologically robust offerings through various hosting options: ASP, netsourcing, and offshore development.
Intira Corporation has won a multi-year contract exceeding $1 million to provide a Netsourcing solution to support ViewTrade's Global Trading Enabler, one of the Internet's first business-to-business (b-to-b) global trade execution utilities for the financial services industry.
Parent comes to WorldStor from Intira, a netsourcing company based in Pleasanton, California.
and Intira Corporation today announced a multi-year contract under which Intira will provide a Netsourcing solution for MobileForce, a leading provider of field service automation solutions.