Business Analysis: The Definition Of Outsourcing

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Definition of outsourcing : There is not only one specific definition in literature for outsourcing. Definitions depends on the source . it can be considered just a reliance on external resources (Mol, 2007). So the outsourcing refers to all activities that are undertaken by outside suppliers. (lbid)
In this study the concept of outsourcing refers to the process of transferring an existing business activity, including the relevant assets, to a third party (Lonsdale & Cox, 1998).
Outsourcing is said to help firms to perform well, however the reader should not confuse outsourcing activities with offshoring (relocating a business function to a distant country).

What companies outsource :
Outsourcing begun when companies started to
Convert fixed cost to variable
The third financial motive for outsourcing is a potential to convert fixed costs into variable costs. outsourcing declines manufacturing costs and reduces investments in plant and equipment . This reduced investment in manufacturing capacity lowers fixed costs and convert them into variable costs. Converting fixed costs into variable have a direct effect on companies’ business indications, for example a return on assets (ROA) and a net profit can be improved. Transferring fixed cost into variable entails short-run cost improvements and encourages companies to outsource (Alexander & Young, 1996a, Gilley & Rasheed, 2000).

3.2. Strategic
(Lacity et al, 1994; Lonsdale & Cox,

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