It is common for businesses to make a comparison on costs. Managers and executives have to choose among the options available to derive a decision that can potentially benefit the enterprise in the short term or in the long run. One of the things included in the strategic planning in most businesses is outsourcing.

Outsourcing is a business model that many companies are now into. There are many companies that outsource one or some of their business functions to vendors that can provide the services they want to outsource. Call center companies are among the popular outsourcing companies in the world today. There are companies that provide outsourcing in information technology to clients belonging to the same industry.

Outsourcing is also common in manufacturing. Many automotive companies outsource the manufacturing of car parts from other companies. Manufacturers of computers have to obtain some of the computer parts from other companies. Many companies in the developed countries today outsource the manufacturing of parts in developing countries where the cost of labor is inexpensive.

Companies that opt to outsource have seen many advantages in strategically going for it. Cost savings is perhaps the primary advantage of outsourcing. Companies normally outsource to a vendor company that can provide a specialized function better than they could. Companies, however, have to see to it that the specialized function is efficient.

One of the business functions that many companies want to outsource is the accounting function. Instead of hiring an in-house accountants and accounting staff, companies may obtain the accounting services of independent accounting firms. Companies can incur lower cost in outsourcing accounting services than paying salaries to employed accountants.

Companies also outsource to minimize the workload of employees. Other companies tried to reduce the onset of staffing fluctuation particularly when a product or service is in demand, thus, they resort to outsourcing one or some of the jobs to other companies.

Companies whether small businesses or large complex corporations may decide to outsource one or some of the business functions that do not directly contribute to profitability. Outsourcing those functions can help companies concentrate on functions and activities that are essential to the growth and prosperity of their enterprises.

Moreover, companies can attain financial flexibility in outsourcing. This can happen when the management of a company decides to dispose the assets that previously supported the outsourced business functions to enhance a company’s cash flow.

Companies can also have the advantage to learn new technologies used by outsourcing vendors. These enable the client companies to have access to new technology that can aid them in competing with other companies. This is in the case of small businesses that compete with larger companies.

Aside from pros, outsourcing also has potential disadvantages. There may be a loss of strategic alignment when more functions are outsourced. Poor quality control can also be a problem. Companies are exposed to length bid process. It is also probable that employees that outsource functions may lose company loyalty for fear that at some point they may lose their jobs. These disadvantages are probabilities; nonetheless, companies can make certain ways to minimize or address them by way of service relationship with outsourcing vendor and strengthening of employer-employee relationship.

Business segments that are normally outsourced to vendors include information technology, facilities, accounting and human resources. Accounting function is typically outsourced by companies that prefer accounting experts from independent companies to handle it. Manufacturing facilities that produce consumer products outsource the production of parts from other companies. Other companies also seek the service of human resources vendor in seeking qualified applicants and employees.

Telemarketing, market research, customer representative and engineering are functions that are also outsourced by companies.

Outsourcing has been used interchangeably with offshoring. Many companies especially manufacturing facilities outsource their functions to companies in countries that have lower labor cost. It can be called outsourcing when it involves an outsourcing vendor and client company. It can also be called offshoring or offshore outsourcing because the organizational function is transferred from another country. But when the function stays in the same corporation but its location is in another country, it is offshoring and not outsourcing.