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Outsourcing


Source: Procurement Glossary
Author: Paul Rogers
Institute: CIPS - UK

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Outsourcing is the process of changing the provider of a service or good from an internal division to an external source.  The make or buy decision precedes outsourcing, which only occurs if the analysis concludes that the better value is possible from sourcing externally.

Outsourcing a business process for the first time requires baselining what services are currently offered, at quality standard and cost, and deciding if there are opportunities to change the range or quality of those services.  Decisions also have to be reached about the future of in-house employees.  The outsourcing process is the application of the procurement process to an activity that is currently insourced, but otherwise is no different to the procurement of other services.  The extent of involvement of the existing procurement team in outsourcing decisions is a measure of the maturity of the procurement function, as sometimes the procurement team is not involved, for reasons of confidentiality or perceived sensitivity of the process.  See also Make or Buy and Transaction Cost Economics.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




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