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 ?
Firms that rely heavily on outsourcing will find other ways to groom staff members, counters Mark Albrecht, CPA, developer of Xpitax outsource software (see "Choose an Outsource Provider," page 60).
But some say partners who manage and monitor the outsource process may find the value of their time makes offshoring more expensive than doing the job in-house.
No matter what an organization needs, tax cosourcing offers ways to strategically outsource only those tasks that you deem appropriate, leaving the most valuable resources and activities to the company's internal staff.
The market uses transformational outsourcing as a buzzword meaning a relationship where competitive advantages are created for the client and also for the outsource providers," she adds.
In recent years, globalization, falling telecommunications costs and technological advances have made it possible for firms to outsource almost everything they need to run a business.
We are constantly seeking highly skilled tax-consulting and tax-compliance professionals, and employees coming on from an outsource situation who are redundant will be offered other positions in the firm's tax practice assuming they meet our criteria.
C&L: Outsource engagements of the type you envision are generally fixed-fee type arrangements where the obligation to attain efficiency passes to the vendor of the outsourced service.
Blue Gross of Northeastern Pennsylvania, which currently outsources implementation support for a new claims system and gap analysis for Health Insurance Portability and Accountability Act compliance to an Indian firm, also plans on keeping the country at the top of its list when looking at future outsourcing opportunities.
Outsource Selected Tax Functions: A major advantage of a tax department performance improvement study is that it will help identify those tax functions that cannot be efficiently performed with existing in-house resources and are prime candidates for outsourcing.
In some few cases, it may be appropriate to outsource the entire compliance function-but.
This study seeks to understand payroll and payroll tax filing trends for companies that outsource or retain those processes in-house.
3 percent of responding organizations reported that the vast majority of their recruitment processes were outsourced and roughly 20 percent reported that they do not outsource at all, nearly three-quarters of organizations reported a portion of their processes were outsourced.