What is the difference between outsourcing and subcontracting?


Business leaders often blur the boundaries between outsourcing and subcontracting. But both practices are different, and each is governed by specific rules and regulations. The main difference is in the amount of the company’s control over the work process, and if the work can be done in the Department.

Outsourcing is an old term that traditionally refers to the practice of bringing in an outside company or vendor to perform the individual parts of a business contract or project. In most cases, the company subcontracts another business to perform a task that cannot be handled internally. Of subcontractor and vendor work closely throughout the project, and the hiring party has reasonable control over the process.

Outsourcing was first recognized as a business strategy in 1989 and has become an integral part of international business and Economics during the 1990-ies. As it has become very popular in the early 21st century has become a buzzword outsourcing for businesses of all sizes, causes confusion between what qualifies as subcontracting and what really is outsourcing.

Tasks to outsource, as a rule, relate to processes that can be performed by regular employees of the company. By reserving business personnel for other tasks, outsourcing is a cost-effective solution for payroll, operating expenses and overhead. The company may contract an external provider to manage administrative work, for example, so that existing staff can remain focused on production or sales. Third-party works independently to perform required tasks, communicating as necessary.

The difference between outsourcing and subcontracting is fine, but it is important to determine the conditions when the enterprise with its stakeholders and customers.

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