Tracing Back The Origin Of Outsourcing

When societies first formed, the people in those communities began to deal in services, goods and other items they could trade amongst themselves. Outsourcing started first with the production of tools, food and household appliances, and a worker outsourced an activity to another worker.

In the industrial age there was not too much outsourcing going on. In fact in the 1800’s and 1900’s the organizations were integrated vertically and each organization took care of its own manufacturing, mining and production from start to finish. The retail stores who sold the goods were also owned by the main company, so nothing was being outsourced.

Most companies of the time not only handled their own taxes, but they were self-insured, had their own lawyers and even built their own buildings, offices and factories without any outside help or assistance.

During the industrial revolution there was a lot of growth in the area of outsourcing especially in such service areas as insurance, engineering, and architecture. At the time, even though they had started to outsource, almost everyone lived in the same country, city and town. When the service industry came into being, they started to do outsourcing and gave their jobs to outside contractors.

The history of outsourcing shows that outsourcing started with manufacturing of items such as apparel, toys and shoes. Later on high-tech items such as consumer goods and electronics were starting to be outsourced and in fact pricing through outsourcing was extremely competitive. In search of lower costs, many manufacturers started to look for offshore assistance, and began to employ offshore companies to do the work for them. As transportation means increased so did offshore manufacturing jobs, since the goods that had been manufactured offshore could now travel back at a faster pace and be sold in the retail and department stores.

As the lower income countries improved in their skills, and the people became more educated, outsourcing too became more important and more cost effective. In the 1970’s in the United States computer companies outsourced their contracts and this has continued ever since. Billing, processing and payrolls have also been outsourced where necessary. Insurance companies covering the cost of medications and medical clinics who administer your records use claim processing centers that are offshore in such places as India, the Philippines or Russia.

Eventually many companies in the United States and Europe realized that outsourcing was a good method of keeping costs low and now even data-transcription, information technology and call centers are being outsourced.