Put in simple words, the definition of outsourcing is the practice of obtaining goods and services from a foreign supplier. This practice is most commonly used in industries where there’s either a shortage of labor for particular positions or where the cost of labor is too high. For example, software developers or designers, as it reveals the Tech Salaries Report.Outsourcing is the practice of obtaining goods and services from a foreign supplier.Companies can outsource any position whatsoever. Still, today, we see companies using it for non-fundamental roles, those whose function is to provide support to the central infrastructure of the company or aid in the day-to-day operations of the company.
The simplest way to put it is that companies outsource because it reduces their overhead to produce a product, thus increasing their profit margins. It’s purely a business decision.
We live in a world where the same amount of work done in one country or city isn’t equally paid as if it were done elsewhere. Some can argue that the discrepancies in pay levels come from state and federal taxes, the country’s economic standpoint (measured in GDP per capita), and wage-setting institutions. Regardless, the basis of the decision is an economic one.
According to Brandon Gaille, 46% of companies have cited their top reason for outsourcing was to reduce operating costs, with 12% desiring to access world-class capabilities.
Here is a thorough breakdown of the reasons as to why people outsource: