I am convinced that you already heard term “outsourcing”. This starts to be more and more popular. Very often people know intuitively what this term means, but cannot explain it in details. Many of people, which I have met, don’t also understand why firms decide to use it.
I have often answered the following question – why would firms pay for an external firm to do things that they are able to do by themselves? I have to admit that the logic may seem to have sense – if somebody else can earn money on doing something for our company, why won’t our firm do it by themselves?
I am going to try to present that on the following example. Imagine for a while that you posess a company which invents and produces new mobile phones. You are thinking about outsourcing managed services- http://www.smtsoftware.com/en/services/managed-services/. Consequently, you are looking for a prosperous firm which works in the area of mobile app development- http://smtsoftware.com/en/mobile-development/. What would your company gain if you decide to do that?
To begin with, you can reduce costs. Developing new complex producst will require employing many specialists that are really expensive as employees. It might be a lot more cost-effective to posses to outsource an external company which specialises in this area and already has needed staff. Thanks to this, it is highly likely to be low-priced to outsource an external firm, than to employ proffesionals within the structure of our enterprise. This is one of necessary issue which makes businesses go for outsourcing. The prime aim is cost cut. Definitely, not the only 1.
However, firms can cut down labor costs also by outsourcing services from an external enterprise which is located abroad. Surely, it has to be country that has very well educated people but cheaper cost labor at the same time. I believe India is the best example of a country which is particularly popular in such services.
Finally, outsourcign enables to increase the quality of services. E.g., if you agree that mobile app development would be created by outsourced firm which specialised just on this area, this would be definitely more successful than if it were created by our employees who are not specialised in this narrow field of expertise.