Outsourcing isn’t entirely a new concept – but ever wondered just how far back the practice stretches? Some sources say it started being recognized as a strategy in 1989, while others say that’s only the year it was formally identified by the term ‘outsourcing’, and it’s been in practice even before then.
The Industrial Revolution
Whichever way you look at it, one can argue that outsourcing has been around ever since the Industrial Revolution. For as long as companies have looked for ways to increase their advantages over their competitors, the notion of outsourcing has never been far behind. In fact, one-upping the competition is the root that made the outsourcing tree bear fruit.
At the forefront of the outsourcing movement was when publishing companies started to outsource the content they need instead of relying on in-house writers. At the other end of the spectrum, industrialization paved way for construction companies to outsource independent laborers outside their partner firm’s capacity. The first decade or two of the movement has seen low- and high-rise buildings being constructed at break-neck speed. This accumulated to more work than usual, and with schedules that needed to be fulfilled, construction companies hired outside contractors to meet their deadlines.
Getting more laborers that weren’t on their employ was almost a trade secret for top construction companies then, and although “outsourcing” was not the word used for this practice, it set precedent on how outsourcing would evolve.
Over time, two stages of outsourcing have become obvious – an evolution of sorts. The first stage and the most basic involves ancillary but still essential services. This refers to services that can’t be provided in-house, for whatever reason. Other support services – functions not related to the core business but necessary in helping to run it – include accounting, data processing, and even security.
The company that outsourced certain tasks will be able to concentrate on their core business without worrying that other services will fall behind or become neglected. Without outsourcing, that very scenario is likely; conversely, in taking care of necessary but non-core tasks, the company risks missing out on chances to grow the business. It’s obvious that outsourcing is the happy medium that benefits both firms involved.
The second stage, which is what most companies are seeing today, is that of outsourcing tasks to form strategic partnerships. The tasks outsourced at this stage usually involve the customer directly. Customer service and marketing are the most common tasks outsourced at this stage. In this day and age, such tasks involve the Internet and social media, meaning companies which handle these tasks will need a background in information technology.
That said, the goal of outsourcing today isn’t ownership, but on the development of such partnerships where both companies get the exposure they need. This means that companies now need to select the outsourcing firm based on who can deliver more effective results for a particular function, instead of selecting firms based on whether the tasks being outsourced are core functions or more of commodities.
It’s important to remember that outsourcing isn’t simply supplementing a business’ resources by subcontracting tasks to other parties. It’s just as important to keep in mind certain factors that influence how successful outsourcing will be for that company. For instance, the outsourcing firm should be able to understand company goals, and both parties should be able to work out a strategic plan as well as a contract that is properly structured.
Unfortunately, there’s no definite list of criteria for an outsourcing versus in-house analysis, because each outsourcing project is unique. However, just as outsourcing has evolved over the years, your own business stands a chance to evolve because of it, so it’s definitely something to consider.