Outsourcing

The term outsourcing is used to describe the practice of subcontracting certain services to an organization or company outside of the parent organization or company. It is important to understand that outsourcing is different from the act of contracting. With outsourcing, the parent organization (buyer) in essence transfers ownership of a business process to the supplier. It is the expertise that the supplier brings that is attractive to the parent organization. The buyer does not have the capabilities to dictate how they want the job done, just that the supplier needs to complete the task they are paid to perform. It is up to the supplier to develop the tools and processes necessary to achieve the end product. Buyers concerned about the specifics of how the task is performed should consider contracting for a service instead of outsourcing.

Health care practices today, whether hospitals or physicians' offices, have moved to outsourcing as a means of accomplishing many tasks. Determining the financial benefits of outsourcing is necessary to determine if an organization should opt for outsourcing or try to keep the task in-house. Expertise in a wide array of business practices is necessary to be an efficient profitable organization. Outsourcing is a way for even small companies to harness the efficiencies and expertise that only a large organization may achieve. Examples include companies (suppliers) that submit electronic claims, billing and collection agencies, dictation and transcription services, and companies that will handle and institute all issues related to human resources (payroll, benefits, and risk management). In the future there will be even greater proliferation of additional outsourced services that will contribute to running a profitable and successful health care business.

Outsourcing is typically the domain of trade economists, whereas nonstandard work arrangements are the province of labor economists. Temporary work is one aspect of nonstandard work arrangements just as are part-time work, contract work, and other work forms. Although there are many polemics on the positive and negative results of outsourcing and nonstandard work on productivity and personal well-being, industrial/organizational (I/O) psychologists have paid scant research attention to either.

In the early 1980s outsourcing referred to the situation in which firms expanded their purchases of products (such as automakers buying car seat fabrics) rather than making them themselves. By 2004 outsourcing had taken on a different meaning. It referred to the specific segment of the growing international trade in services. This segment consists of arm's length ...