Glossary term
Outsourcing: Meaning and Definition
Reviewed and approved by Dr. Anamika ShrivastavaPublished Last updated
Outsourcing is the practice of hiring a service from an outside provider, often in another country, that was earlier done within the firm. Fast communication and information technology have made it practical. India is a leading destination because of low wages and a large pool of skilled, English-speaking workers.
In more detail
Outsourcing rose with cheap international communication. It lets firms cut costs and focus on core work, and it created large numbers of service jobs in India. Risks include dependence on foreign clients, wage pressure and the loss of jobs in the countries sending the work.
Example
A bank in another country that uses an Indian call centre for customer service, or an Indian firm preparing accounts for a foreign company, is outsourcing.
Key points
- Examples: call centres, accountancy, software support.
- Enabled by IT.
- Creates jobs in the destination country.
Common mistake
Thinking outsourcing means only call centres. It covers many services.
Related terms
Where it is explained
This term is explained in Class 11 Indian Economic Development Chapter 3: Liberalisation, Privatisation and Globalisation: An Appraisal.