Managerial Economics Essay

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Business Outsourcing
Willard Williamson, Sr.
Managerial Accounting for Managers
Instructor: Mark Taylor
August 29, 2011

Abstract:

In this paper I will define the meaning of my topic so that it can be understood and have clear meaning. I will go into scenarios of the topic to explain its use in the business industry. I will attempt to show the positive and negative factors of using Outsourcing in the management arena. I will show how Outsourcing can be beneficial to the midsized business as well as large businesses.   In the conclusion I will relate all of the material as to whether outsourcing is the means to be used by businesses or not.

What is outsourcing? Outsourcing is simply the farming out of services to a third party. With regards to information technology, outsourcing can include anything from outsourcing all management of IT to an IBM or HP, to outsourcing a very small and easily defined service, such as disaster recovery or data storage, and everything in between (Anonymous, ND). Outsourcing is sometimes used interchangeably and generally incorrectly with Offshoring. Offshoring is in fact a small but important subset of Outsourcing: this is where a company outsources services to a third party in a country other than the one in which the client company is based, primarily to take advantage of lower labor costs (Anonymous, ND). Offshoring itself has proven to a very hot potato politically because unlike domestic outsourcing, where employees often have the opportunity to keep their jobs and transfer to the outsourcer, where Offshore Outsourcing tends to lay off employees (Anonymous, ND).
Why do businesses use Outsourcing? Outsourcing is used for a variety of reasons and here are a few: it is use because of lower costs (due to economics and/or lower labor costs), lack of in-house resources, increased efficiency, access to specific IT skills, to have access to innovation and thought leadership, to increase flexibility to meet changing...

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