A brief history of Outsourcing

Industry News
A pocket watch hanging from a pile of books

Outsourcing is becoming commonplace in the modern world across most industries. The world is becoming ever smaller thanks to advances in technology but it is not a new phenomenon. In fact, outsourcing has been a business practice for the past 70 years. Here’s a brief look at the history of outsourcing.

A good example of an early version of outsourcing is the motor industry in Detroit, Michigan in the late ’60s. Companies like Ford, General Motors, and Chrysler, also known as “the big three” were all based in and around Detroit and were the city’s main industry for many years beforehand, coining the nickname “the Motor City”. However, due to economic strife, these companies had no choice but to outsource their work to Canada and Mexico to try and save these companies money. However, the term outsourcing was not used at this time.

Female Welders from the Lincoln motors factory

Fast forward to the 1980s, and we see “traditional outsourcing” being used for non-core business processes. The majority of the time traditional outsourcing was used was to reduce cost and maximize profits which we still see happening today. Again, this happened during the Reagan era, another time where the United States suffered an economic crisis.

At the end of the century, outsourcing was starting to be used in a different way. “Strategic Outsourcing” is when a business wouldn’t necessarily just be looking to save money but actually improve performance. This type of outsourcing is becoming a more and more popular reason why companies outsource. It can completely change the game for a company, improving their performance and raising the bar as quality goes too.

Modern day outsourcing

 As the 2000s marched on, Strategic Outsourcing then evolved into “Transformational Outsourcing”. Strategic and Transformational outsourcing is fairly similar but transformational outsourcing is a natural progression of strategic outsourcing. Transformational outsourcing is not only looking to improve quality or output but looks to innovate and enhance operations for a company. This is what most good BPO companies look to offer their clients today. 

As I mentioned at the beginning of the article, outsourcing has dramatically changed over the years, as have the reasons a company would outsource. It’s no longer the “anti-American job-stealing” enterprise that people thought it to be. In fact, it is one of the best solutions and resources for any business, all over the world.