Outsourcing is the handing over of a business process to an external service vendor. The service provider will take over the responsibility of day to day function and continuance of the assigned process.

There are a number of diverse types of outsourcing.  Several companies outsource some degree of functions, while others outsource complete operations.  Let’s take Microsoft for example; their entire manufacturing process is outsourced.Obviously, fees are part of outsourcing depending on the services necessary, and in cases like Microsoft, the contract can cost millions and billions of dollars, and it becomes frequent for the client’s employees to be moved to the supplier company. Companies such as IBM, HP, EDS and Accenture are some of the leading outsourcing companies offering their services.

Those who outsource entire operations can be categorized in two; Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO).   

Business Process Outsourcing is sub-divided into call centre outsourcing (CCO), human resource outsourcing (HRO), finance and accounting (FAO) outsourcing, and claims processing outsourcing (CPO).

1. Information Technology Outsourcing (ITO)
2. Business Process Outsourcing (BPO)
b. Human Resource Outsourcing (HRO)
2.2. Human Resource Outsourcing (HRO)
2.3. Finance and Accounting Outsourcing (FAO)
2. Information Technology Outsourcing (ITO)

Basically, every business process can be transferred over to outsourcing companies. The most frequent processes being outsourced are recruitment, marketing, editing, web design, web hosting, website maintenance, and IT maintenance, switch board (telephone answering), manufacturing, accounts, logistics, and distribution.

There are innumerable motivations why a business ought to consider outsourcing.  Several firms may not have the on hand skills needed to finish a process, handing over this process to outsourcing companies may assure a higher success rate rather than if the business itself runs it.

Another reason is that the process may be difficult to control, in general, or perhaps due to business growth.   Experienced outsourcing companies already have the necessary skills and knowledge to manage the process for you.  Additionally, the process can be performed better, cheaper, and faster too.

If a business has inferior domestic service, which may or may not be related to deficiency of skills, or every so often, a company may be deficient in the resources, or the resources are not available in-house at all, in order to complete the process, such as the case for smaller companies.  
Outsourcing companies can present the best solution.

Other reasons may be that you require your employees' time elsewhere in the business and the process may not contribute to competitive advantage.  Outsourcing aids companies to make more efficient their business operations by allowing them to concentrate on core income generating activities.

Outsourcing companies offers companies access to specialist capabilities, therefore leveling the playing field for smaller companies.  It minimizes risks by sharing it between the company and the outsourcing provider - who has the skills and experience for managing the risk better, giving businesses peace of mind that the process is in good and reliable hands.

With outsourcing, companies do not have to be anxious about continually commencing new technologies to keep them competitive.  An excellent outsourcing provider will already have this covered for them.  
Outsourcing frees up human resources, letting companies focus their employee’s activities on more crucial tasks.  Outsourcing frees up cash flow by converting fixed costs to variable costs.  
Moreover, it boosts service quality, improves the control of your business, and allows the business more flexible to change/demand.