Strategic outsourcing is the process of engaging the services of a provider to manage essential tasks that would otherwise be managed by in-house personnel. This is often done to allow a business to arrange the use of its assets to best advantage, and allow the company to move closer to the achievement of its goals. An outsourcing strategy of this type may be employed by businesses and other organizations of any size, and normally helps to reduce the cost of operations as well as allow available resources to be allocated to the other necessary functions that are still managed within the organization proper.
Many people tend to associate outsourcing with small companies that operate with limited budgets. This is often true, since a smaller business enterprise is likely to have limited resources. When this is the case, a strategic outsourcing effort may involve contracting with a provider to manage the process of generating invoices to customers, receiving those payments, and paying any outstanding debts using the proceeds from those payments. Thus, the outsourcing allows the small company to divert resources that would normally go to supporting an accounting department into other important areas, such as product development, marketing, or sales.
Larger businesses can also make use of strategic outsourcing as a means of utilizing their resources to better advantage. For example, a business may choose not to maintain an in-house sales force, but contract out the sales effort to others who generate sales on behalf of the company. With this model, the business does not have to be concerned with the expense of salaries and benefit packages for salespeople. Instead, the business only has to provide the agreed-upon commissions for sales generated by the business partner, and any monthly fee charged as part of the contractual agreement between the two entities.
The core idea behind strategic outsourcing is to benefit in some manner from allowing outside entities to take over the operation and management of a given function. Those benefits can take many different forms. Often, the idea is to increase the bottom line of a company by reducing various operating expenses. At other times, the benefit has to do with having immediate access to professionals who specialize in handling the outsourced function, without the need to train personnel to take over those functions. The benefit may be a matter of convenience, allowing the business owner to not have to deal with necessary functions that he or she does not wish to deal with, or feels unable to manage with any degree of efficiency. As long as the benefits that are generated by the arrangement is considered sufficient by the client, then the process of strategic outsourcing can be considered a success.