What Is Outsourcing? Terms to Know
Outsourcing can often (though certainly not always) lead to work-at-home opportunities. Learn more about outsourcing and some related terms to get a better understanding of how it can help you.
Outsourcing is when a company contracts with an outside provider for services or other business processes, rather than employing staff to do these services in-house. These services may be provided on-site or off-site. Typically outsourcing is done with an eye toward efficiency and cost-saving for the company. Outsourcing could be as simple as hiring a freelancer to edit a company newsletter or as large-scale as hiring an outsourcing company to handle all accounting and payroll functions.
Outsourcing can be when a company directly hires an independent contractor to provide service. Or a company may hire an outsourcing company that either employs or contracts with workers to provide the services.
Business Process Outsourcing (BPO)
BPO stands for "business process outsourcing," which is simply another term for outsourcing. The term BPO, however, is frequently used to describe a company that is contracted to provide for services or business processes. It might include manufacturing or back-office functions such as accounting and human resources. But BPO might also include front-end services such as customer care and technical support. "Global BPO" is another term for offshoring or outsourcing outside a company's home country or primary market. BPO jobs are not necessarily working at home, but some, like call centers, can be.
Offshoring is a form of outsourcing. Offshoring is when a company moves business processes or services to a country other than its home country or primary marketplace. It is usually done to cut costs. Typically the new country has lower labor costs.
Offshoring and outsourcing are not synonymous, though to many they have the same negative connotation. However, outsourcing can mean job opportunities for those who want to work from home.
The definition of homeshoring (also known as homesourcing), according to Dictionary.com, is "the transfer of service industry jobs to electronically connected home-based employees." So homeshoring is essentially turning office jobs into work at home jobs.
But homeshoring is different from offshoring because in homeshoring the home-based jobs are typically done within the country where the employer operates.
Homeshoring may or may not involve outsourcing, which is contracting for work to be done by a third party outside the company. If a company employs its home-based workers, then homeshoring is not outsourcing.
Examples: A company that uses U.S. home-based call center agents to take calls from within the U.S. is homeshoring. However, if the same U.S.-based company hired call center agents in India to take calls from U.S. customers, that would be offshoring.