Outsourcing is not a new phenomenon, as many of us believe. Many thousands of years ago, our ancestors had understood the need for outsourcing .They realized that it would be impossible for them to fulfill all their needs by themselves, but they would have to depend on someone else to serve them. The service provider possessed specialized skills, which enabled him to do the work faster, cheaper and more efficiently. Thus, we observe that in early societies, every man had a part to play - he could be a farmer, a merchant, a soldier or a barber. He was, in modern parlance, a client as well as a service provider.
However, just before the Industrial Revolution, the trend of companies was to retain all activities for themselves. They nearly never relied on outsourcing to look after their sales, storage and transportation, legal affairs, and taxes. The company performed all of these by itself.
Industrial Revolution and Outsourcing:
The great Industrial Revolution between 1750 and 1900 that took place in Europe provided much impetus to the development of outsourcing. The period saw a manifold increase in the production of goods; the market for them widened and profits were like never before. Many companies began to outsource such activities like accounting, insurance, engineering, legal needs, etc to specialized firms. These firms were within the country and not offshore. At this point of time, outsourcing (if we could call that so) was exploitative and ugly. For instance, the Indian farmers were forced to provide raw materials like cotton and indigo for the British companies when they would rather produce food grains which was the need of the hour .The Indian cloth weavers could not match the foreign made cloth, which was much superior with regard to quality and much cheaper. The British free trade policy ruined the Indian farmers and weavers and resulted in poverty, unemployment, and starvation.
Development of off shore outsourcing:
Middle of the 20 th century saw many political and economic changes combined with the development of faster means of transportation. Distances began to matter less. Manufacture of low costing toys and electronic goods, apparels, etc were outsourced to less developed countries. The political set up had changed considerably. Many countries in Asia had become free. Outsourcing was a welcome development as it benefited the developing economies by increasing employment and income levels of the workers. The education and skill levels too improved. The governments in these developing countries took care to develop adequate infrastructure necessary for manufacturing companies to maximize profits.
The IT revolution and the improvement in computer technology had a great part to play in the next stage in the outsourcing history. In the 1990s, many companies began to outsource activities that were essential for them, but these did not include their core activities. Outsourced activities included data processing, human resources and accounting. All these enhanced profits for their clients. They clung on to ownership and management of core activities.
Currently, because of globalization, the trend is towards forming ?strategic partnerships'. This means that large companies are ready to outsource even their core activities to service providers if it means greater profits. Outsourcing is now an indispensable part of any large organization. Despite the controversies surrounding outsourcing almost every activity - customer service business, telemarketing, logistics, computer hardware, software, IT services, finance and accounting, medical transcription, research and development, legal, human resource development is being done.
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