UK Accounting Glossary
Outsourcing is the practice of companies transferring work to outside sources to increase efficiency and cut costs. Outsourcing differs from simply buying products and services from a supplier. Rather than dealing at arms-length, outsourcing usually entails substantial coordination, if not outright management, of the external vendor’s activities.
In the early 21st century, outsourcing had one other, strongly negative, connotation: the displacement of U.S. staff by foreign workers.
For example, a stereotypical example of outsourcing might be the use of a call centre in India for making airline reservations for a U.S. carrier.
Those opposing outsourcing argue that it destroys American jobs and erodes the power of labour unions. Proponents of outsourcing say, however, that outsourcing increases productivity and profits; while causing some short-term displacement, outsourcing ultimately enhances the economic opportunity for all workers.
Outsourcing is sometimes used loosely as a synonym for globalization, but outsourcing is a narrower term: unlike globalization, outsourcing does not comprehend all types of economic interdependence between countries.
The computer company began outsourcing late hour customer support due to the low volume of calls and the cheaper costs.
Outsourcing is one way for corporations to save money, though it may impact customer service negatively.
They decided to outsource the design and manufacture of the system to a vendor.
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This glossary post was last updated: 6th February 2020.