outsourcing

(redirected from outsource)
Also found in: Dictionary, Thesaurus, Medical, Idioms, Encyclopedia, Wikipedia.

Outsourcing

Purchasing a significant percentage of intermediate components from outside suppliers.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

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.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005
References in periodicals archive ?
"The functions that they outsource to us are not strategic to their business.
The larger servicers are more likely to outsource but also have more access to economies of scale, and we are unable to clearly allocate the share of cost savings attributable to each factor.
maximizing the size of the slice for any one party (for example, lower costs at the expense of the outsource provider's profits).
Outsourcing Decision Model Don't Outsource Outsource High Economies of Scale Low Low Core Competence High Low Risk/Control High Questions to Explore with a Potential Outsourcing Partner
Interestingly, APQC's data also shows that outsourcing organizations have personnel costs associated with warehousing that are very close to those of organizations that do not outsource. At the median, outsourcing organizations spend $2.36 per $1,000 in revenue on personnel costs for operating warehousing, and organizations that do not outsource spend $2.74 per $1,000 in revenue on the same type of costs.
The level of propensity to outsource Study: Based on hospital services features by managers and staff perspective in hospitals of Shiraz University of Medical Science.
* In 2010, 53% predicted they would outsource at least some microbial fermentation production in 2015; and it looks like 56% will do so.
Profile of the HR functions outsource by respondents Functions Response Frequency Percent Training No 35 36.5 Yes 61 63.5 Recruitment No 40 41.7 Yes 56 58.3 Compensation & Benefits No 80 83.3 Yes 16 16.7 Payroll No 72 75.0 Yes 24 25.0 Employees Services No 68 70.8 Yes 28 29.2 Employees Record System No 61 63.5 Yes 35 36.5 Operator/Labor Supply No 53 55.2 Yes 43 44.8 Table 3.
The 39% respondents agree that cost is the main factor due to which company outsource. 18% respondents strongly agree that cost is the main factor that enforces the companies to outsource their transport outsourcing.
And for at least one company--Renesas Electronics Corp., which produces 40% of the microprocessors used by automakers around the world--it is a way to hedge against supply-chain interruptions; the company recently reported plans to outsource 25% of its production by 2013 (up from 8% currently) in response to the earthquake and tsunami that hit Japan in March 2011 (Chester Dawson, "Even Japan Inc.
Of the 250 company leaders interviewed by the FSU students in seven states, 73.5 percent said they outsource in some capacity.
"Companies must focus on what they can do best and appropriately outsource activities that value chain partners can do better.