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The Truth about Outsourcing:
You Think You Know, But You Have No Idea
In the Beginning
"Outsourcing entered the business lexicon in the 1990's and often refers to the delegation of non-core operations from internal production to an external entity specializing in the management of that operation. The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of worldwide labor, capital, technology and resources. Outsourcing involves transferring or sharing management control and/or decision-making of a business function to an outside supplier, which involves a degree of two-way information exchange, coordination and trust between the outsourcer and its client. Such a relationship between economic entities is qualitatively different than traditional relationships between buyer and seller of services in that the involved economic entities in an "outsourcing" relationship dynamically integrate and share management control of the labor process rather than enter in contracting relationships where both entities remain separate in the coordination of the production of goods and services. Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering" (wikipedia, 2006).
Labor Supply and Demand
Outsourcing and offshoring can be directly related to the theory of labor supply and demand. The theory of labor supply and demand states that as a person's wage increases so will ...