Have you ever been wondering why firms develop outsourcing?

I am sure that you already heard term “outsourcing”. This term becomes more and more popular. Usually people know intuitively what this term means, but cannot explain it if somebody asks. Most of people, which I have met, don’t also understand why firms use this.

I have often been asked the following thing – why would firms pay for any external firm to do things that they are able to do by themselves? I need to admit that the logic might seem to have sense – if external company is able to earn money on doing an activity for our company, why wouldn’t our company conduct it by themselves?

I will try to explain this on the following example. Assume for a while that you own a business that invents and produces new mobile phones. You are wondering about outsourcing managed services- see more details. In consequence, you are looking for a favourable company which works in the field of mobile app development- see information. What would your firm gain if you decide to outsource?

To begin with, you could save money. Developing new advanced producst would require employing many professionals that are very expensive as employees. It may be a lot more beneficial to have to outsource an external company which is specialised in that field and already employs experienced staff. As a result of, it is very likely to be less expensive to outsource an external enterprise, than to hire proffesionals within the structure of our firm. This is 1 of substantial factor that makes firms use outsourcing. The main target is cost cut. Definitely, not the only 1.

Nevertheless, firms may lessen labor costs also by outsourcing services from the external enterprise which is located in the foreign country. Definitely, it has to be country which has very well educated workers but lower cost labor at the same time. I think India could be the best example of such country that is particularly popular in such services.

Finally, outsourcign allows to increase the quality of services. E.g., if you decide that mobile app development would be created by outsourced firm which specialised just on this field, this would be definitely more successful than if this were created by our employees who are not specialised in that narrow area of expertise.