Outsourcing And Subcontracting

Hello there! Don’t mix it up Outsourcing and Subcontracting are totally different. Without delay, I explained Outsourcing and Subcontracting in a layman’s understanding. The basic things you will get from this article are the definition of both terms and the reasons and benefit associated with both. GOODLUCK!

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Discuss Outsourcing And Subcontracting.


It is the act of contracting to another company or person to do a particular task or function. Often the tasks that outsourced could be performed by the company itself, but in many cases, there are financial advantages that come from outsourcing and prominent advantage seems to be the fact that it often saves money and also allows the company to focus on more important factors.

The outsourcing firms that are providing the outsourcing services are regarded as a third party or service providers. Today, many businesses still hire service providers to handle some of their business processes. The most common forms of outsourcing are information technology outsourcing.

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The Reasons And Benefits Associated With Outsourcing Policy Are:

  1. It reduces overhead cost and raises efficiency saving.
  2. It allows focusing on those business activities that are important and create greater value.
  3. It ensures optimal usage of knowledge, equipment and experience of the third party.
  4. Outsourcing reduces the risk associated with a sub-standard level of operation.
  5. It reduces the core-activities of the company.


A business of all sizes sometimes lack the resources to accomplish the tasks facing them. At other times, companies realize that they don’t have the required expertise in-house to obtain the required results. Finally, management can determine that external suppliers who specialize in a particular field can carry out work at a lower cost than internal departments.

In all these cases, companies look at subcontracting as a possible option. In other words, it is the practice of assigning part of the obligation and tasks under a contract to another party known as a subcontractor. Subcontracting is commonly used in areas where complex projects are involved such as construction and information technology.

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The Reasons And Benefits For Subcontracting Are:-

  1. Lack of specialists or experts within the organization.
  2. Lack of fund.
  3. The nature of the job or task to be performed i.e. if the project is much complex, it may require a subcontractor to take part of the job.
  4. Low technical knowledge on the part of the part of the contractor may result in assigning some part of the project to experts that specialize in this area of the profession.
  5. It saves certain amounts of money rather than relying on the main contractor for the execution of the whole project.
  6. Timely delivery of materials.
  7. To solve immediate problem in which the firm is lacking in performing the task or function to be carried out.
  8. To ensure a smooth running of the project within the shortest period.
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