Definition and History of Outsourcing
Outsourcing can be defined as the act of employing an external entity to carry out tasks which would ordinarily have been completed by those working in-house. It can also be referred to by the term “contracting out”.
The history of outsourcing is longer than most might think. Although outsourcing is generally associated with the modern-day workplace, the first people to employ outsourcing on a large scale were national leaders and rulers from centuries ago. They would outsource architects, engineers, and other construction workers from other countries to build their cities. Some also chose to outsource weapon makers, shipbuilders, and military strategists for the purposes of building the strength of their country’s military force.
The outsourcing landscape began to change in the mid-19th century. It was at this time that outsourcing related to legal and accounting matters became the world’s dominant form of outsourcing. This became the case because many people required their legal matters related to business law to be settled by qualified specialists who had experience in such areas. Therefore, private law offices which provided a variety of services began to become prevalent. As they provided more services, their consulting routines broadened. This eventually led to their becoming law outsourcing firms.
In the 20th century, outsourcing in the fields of manufacturing and IT took over as the most prominent forms of outsourcing. This new growth in outsourcing was driven by the effects of World War I and World War II. In both cases, people who had returned from serving their country during the war had to go back to work, but not all of them were necessarily able to find a job in which they would have been best suited. As most of the available jobs were in the manufacturing sector, outsourcing in this field grew accordingly. Then, as the years passed, technological development accelerated all over the world. The earliest IT outsourcing companies would work with banks and reduce the banks’ expenses by using early computers to save time and therefore money. IT outsourcing became a major part of the business world because companies came to understand that they would be better served if they were to use third-party technological infrastructure solutions as compared to ones created from within the company.
Why Companies Choose to Outsource
Outsourcing has been proven to help many a company in a variety of ways. This fact equally applies to companies based in Singapore as well as those based elsewhere. One of the most important reasons in favor of a company’s choice to outsource business functions relates to the amount of money which would be saved. In most cases, it costs far less to outsource the completion of such important functions and tasks than it would to pay an in-house worker whose job it is to do the same.
Another reason why companies outsource business functions is to assure quality of the final product. This is because when companies outsource their business functions, they will usually do so to those who are specialists in the particular areas pertaining to the business functions to be outsourced. Conversely, those who rely on in-house workers for the completion of these functions might not be depending on the services of someone who is a specialist. Therefore, the quality of the outsourced work will often be higher than that of the non-outsourced work.
Another advantage of outsourcing is the fact that it helps a company build connections. By outsourcing, the company will come into closer contact with the entity to which it has outsourced its business functions. In this way, the two companies will begin to know more about each other, potentially paving the way for greater collaboration or even partnerships on certain matters in the future. Having influential contacts is important in the corporate realm, and outsourcing can either directly or indirectly lead to a company achieving such an outcome. Therefore, the building and maintaining of connections is another important benefit that comes with outsourcing.
Why Companies Choose Not to Outsource
However, it should also be noted that not all companies choose to outsource their business functions. There are some which prefer to use in-house workers to complete such tasks. These companies have their own reason for this choice, and at least on the surface, they seem to be equally valid. One of these reasons is the fact that they intend to train their in-house workers. This is understandable because in Singapore, there is currently an ongoing labor shortage. This means that for many companies, it is not as easy to hire full-time, specialized staff members. While some choose to overcome this problem through outsourcing, others prefer to use in-house workers in order to give them more training, experience, and knowledge. By doing so, the employees will receive more practice, gain more experience, and raise their overall skill level.
Another reason why some companies might avoid outsourcing is if the company has had previous negative experiences with outsourcing. Although it is unfair and incorrect to generalize all outsourcing as being one and the same, companies and company owners who have had difficult experiences with outsourcing in the past would understandably be wary of doing the same again.
There are also some companies which might not be aware of which are the best outsourcing options. Thus, they may choose to stay away from outsourcing out of a sense of apprehension that the outsourcing service provider that they would have chosen would turn out to be one which is incompetent, inefficient, unwilling to listen to requests, or have any other negative characteristics. This might be particularly true of companies which have never outsourced anything before and therefore do not know much about outsourcing itself, let alone the providers of outsourcing services.
Why Companies Should Outsource
Ultimately, it is a much wiser decision for a company to outsource its business functions than the opposite. Each of the benefits of outsourcing has already been detailed, while each of the supposed “benefits” of not outsourcing can easily be debunked.
For instance, the fact that there is a labor shortage in Singapore should be a reason to outsource, not the inverse. Due to the fact that fewer people than ever before are entering jobs which could otherwise be outsourced, high-quality in-house talent is scarcer in Singapore than it has ever been before. Thus, it would be much simpler and cost-effective to outsource business functions.
Although some company owners may have had problematic experiences with outsourcing in the past, this too is not a good reason to refuse to outsource. In Singapore, such negative experiences tend to be the exception rather than the rule. The general standard of outsourcing service providers there is quite high and is better than that of most countries.
With regard to the point about companies which are unaware of the best outsourcing options, they can always do some research beforehand so that they will know which outsourcing service providers are better than others and therefore should be used. As information on these service providers exists on the Internet, there is no reason why companies should not make good use of this information and apply it accordingly.