What is outsourcing? The difference between Product and Outsourcing companies

Table Of Contents

Not all businesses have enough experience, personnel, and strategies to carry out work plans, marketing campaigns, or business projects. Therefore, these businesses will seek help from Outsource companies

Outsourcing is currently a trend chosen by many businesses to solve many work-related problems. What is Outsource? What are the advantages and disadvantages? Navigos Search will give you the most comprehensive view of Outsource. Let's explore!

1. What is Outsourcing?

Outsourcing is the practice of hiring an external organization to perform tasks, projects, and produce products according to the business's requirements.

Hired enterprises and organizations frequently have high degrees of competence to provide industry-leading services. Businesses will need outsourcing when they do not have the resources to accomplish the task well or want to reduce production and operating costs.

What is Outsourcing?

2. Distinguish between Insourcing and Outsourcing

After understanding what Outsourcing is, you need to distinguish the difference between Insourcing and Outsourcing.

Insourcing is an activity in which a business assigns tasks or authorizes departments or divisions of the business. This department is separate from other ones and focuses on performing specialized work. Outsourcing does not use the business's resources but hires a unit outside the business. The choice of Insourcing or Outsourcing will depend on the resources, financial situation, and goals of each company or business.

3. History of formation and development of Outsource

First seen as a formal business strategy in 1989, outsourcing is the process of hiring third parties to conduct services that were typically performed by the company. Outsourcing has become popular in the operations of businesses.

This method causes many mixed opinions from experts. Some experts do not agree with the idea that Outsourcing encourages businesses to allocate resources appropriately. They believe this method causes underemployment for domestic workers as most businesses tend to hire a unit with foreign expertise.

Up to now, Outsourcing is still a business method used by many businesses to improve productivity and work quality.

Outsourcing formation and development 

4. Advantages and disadvantages of Outsource



Outsourcing companies often focus on one segment and develop well in that segment. Therefore, the qualifications and experience of the Outsourcing unit will bring the best results to the business than the internal staff.

Minimizing operating costs

The cost of outsourcing is frequently less than the expense of training and supporting internal staff to complete tasks as outsourcing organizations have the necessary equipment and resources to do the project without incurring additional costs. Businesses are not required to pay insurance fees, salaries, incentives, or other perks for internal employees when they hire outsourcing units.

Accessing modern technology sources

It's essential for businesses operating in technology to update and access new technology. However, investing in new technology is highly costly. Outsourcing will help businesses access technology thanks to assistance from outside resources without spending a lot of budget.

Improving labor efficiency

When using external resources, businesses will save time to focus on vital tasks. Outsourcing and internal employees perform work concurrently, helping businesses boost labor productivity to stay up with the progress of plans and projects.

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Saving working space

The Outsourcing company operates independently. Thus, the business does not have to provide space or equipment during the hiring process. This is especially useful for organizations with limited space, instead of recruiting more internal employees and allocating workspace for them.

Ensuring efficient operations

The business and the Outsourcing unit will work under a contract. Thus, the two parties must ensure that the agreement is properly implemented. The hired company is in charge of executing the work on time and with high quality. As a result, businesses can feel more comfortable because the outside unit will not want to lose contract compensation or break the terms but will strive to accomplish the work as planned.


Businesses use Outsourcing since their human resources are unqualified. Therefore, when a business decides to use outsourcing services, employees may reconsider their abilities and qualifications to advance their careers. The enterprise's human resources have grown stronger since then.


Security risks

Confidential information is an issue that businesses are concerned about when choosing Outsourcing. Although it has committed not to use or disclose business information, there is no absolute certainty that Outsourcing units will not use or sell information to the business's competitors.


Not all Outsourcing units are accountable and strive to execute their tasks effectively. Some Outsourcing companies do not complete work on schedule or work irresponsibly, affecting the business's progress and work quality. As a result, organizations must be careful when selecting Outsourcing firms.

Quality not guaranteed

The outsourcing business may not completely comprehend the objective and content of the work during the transferring process from the enterprise to the outsourcing unit. As a result, work is not being completed in accordance with business needs, resulting in a decrease in job quality.

Costs incurred

Although using Outsourcing services often has lower costs than recruiting internal employees, it may incur many costs during the implementation process. If the contract between the two parties is not specific, the business must pay additional unexpected costs.

Advantages and disadvantages of Outsourcing

5. Necessary factors for using outsourcing effectively

What are the essential elements for using outsourcing effectively? In the past, many organizations embraced outsourcing to reduce production and operating costs. Managers today have an open strategic vision, aiming to use external resources to promote competitive advantage in the market. To effectively use outsourcing services, businesses must pay attention to the following factors:

  • Determine strategic goals: Before outsourcing, businesses must determine the goals and strategy results. Based on goals, managers will have a basis for allocating resources and adjust strategies if necessary.
  • Build good relationships with related parties: Expanding relationships helps managers collect many objective assessments about
  • Outsourcing companies to select the best unit. If you have a good relationship with the Outsourcing company, cooperation between the two sides becomes successful.
  • Support outsourcing companies: Even though an external unit is hired to perform tasks, businesses also need support when necessary.
  • Businesses must share goals and strategies to help the Outsourcing party grasp the direction and what needs to be done. In addition, businesses should also provide personnel to ensure overall work.
  • Making tight contracts: Preparing a contract includes agreements and commitments between the two parties so that the Outsourcing party is more responsible when performing tasks and feels secure about the benefits the Outsource receives after completing the job well.

6. Distinguish between Product and Outsourcing companies

You can distinguish Product and Outsource companies through the factors in the following table:




Nature of work

- Focus on building, developing, promoting the company's products itself, and earning profits.

- Participate in the product manufacturing process from A to Z.

- Each project usually lasts long and is associated with the company

- Hired to perform specific work at the request of the customer's business, does not own the product or goods.

- Can carry out multiple projects concurrently, get paid for each project upon completion.


- Targeting customers as end users.

- Focus more on making customers satisfied with useful, easy-to-use, and convenient products.

- Focus on your own expertise and work on many different projects.

- Provide products and services according to received requests within the allowable cost.

Working method

- One person can do many different tasks.

- Feel free to create the best methods to improve customer experience and be responsible for those decisions

-  Just focus on one specialty and work on many different projects.

- Do not have to take high responsibility for your decisions and work

What is the difference between Product and Outsourcing?

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Hopefully, you have a better understanding of what Outsourcing is and issues related to outsourcing services to help your business make reasonable decisions to solve work problems in the most effective way.

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