History of outsourcing: From the 18th century to the modern times

The history of outsourcing has always been a fascinating subject for industry professionals who want a deeper understanding of the practice itself.

The practice has brought on jobs and opportunities for millions of people, carving the way to a brighter future.

One of the practice’s goals has always been to reduce costs for companies, no matter how small or big.

The history of outsourcing has come a long way. Let’s take a look at how much the industry has grown since its early days and what awaits in the future.

The early years of the history of outsourcing

Like any other concept, the real starting point of outsourcing is swimming in murky waters. The history of outsourcing dates back to when US companies in the industrial sector started to source out certain parts of their operations.

Outsourcing first took shape during the 18th-century Industrial Revolution when the new age transformed the way factories operated and sourced labor and raw materials.

American factories were no longer limited to their geographical location.

Historically, the US outsourced and imported raw materials from India. These imported inexpensive raw materials were processed in Scotland, making the goods cheaper while maintaining quality.

Factories outsourced their manufacturing activities to cut labor costs while still maintaining the quality of their products.

Businesses were quick to respond, and since then, the concept of outsourcing has evolved to keep up with the ever-changing demands of modern times.

External sourcing has paved the way for many other projects that utilize the assistance of external service providers.

The history of modern outsourcing

The history of modern outsourcing as we know it started between the late ‘80s and early ‘90s.

According to sources, the practice wasn’t a legitimate business idea until 1989. Businesses then started offering services to other organizations and fulfilling the promise of more labor power at a low cost.

Since then, different services, such as telemarketing, telesales, and cold calling, have been offered as outsourced services.

More so, with technological advancements, more types of outsourced services have popped up.

Numerous outsourcing companies offer services, from recruitment process outsourcing (RPO) to digital marketing, to their client list, hoping to attract deals with other businesses.

Outsourcing services were proven to be effective. In fact, according to Statista, the outsourcing industry grew to $92.5 billion in 2019.

The challenges in the history of outsourcing

Outsourcing activities have connected the professional world, from creating more jobs to making companies work together.

Throughout the history of outsourcing, organizations have encountered numerous challenges, particularly in back office operations within the service industry.

The evolution of technological advances has greatly impacted the way businesses practice outsourcing, presenting new opportunities and complexities.

The digital age would never have been the same without outsourcing. However, some people still doubt its benefits.

Like any other business concept, it has its own disadvantages.

Employees from smaller companies would complain about outsourced workers “stealing” their jobs. Meanwhile, some think that globalization, empowered by outsourcing, has impacted local businesses.

While some claims may ring true, many of these popular misconceptions have been proven untrue, and the advantages of outsourcing outweigh its disadvantages.

That said, many companies and individuals are working together to combat any of the negative effects of outsourcing.

Since the practice is deeply ingrained in our society, major changes such as reformation would greatly affect businesses and their employees.

How the history of outsourcing impacted industries in the 21st century

Strategic outsourcing has significantly impacted industries in the 21st century by reshaping traditional business model.

Embracing outsourcing as an official business strategy has enabled companies to lower costs, increase efficiencies, and focus on core competencies.

Many industries now regularly outsource raw materials and services to improve their competitive advantage in the global market.

Since its establishment, the practice of outsourcing has impacted many industries and even people’s lives.

Tech industry

One of the biggest and most prolific industries to ever adopt the practice is the tech sector.

From ideation to manufacturing, it seems like no tech company hasn’t been touched by outsourcing.

One example is Apple Inc.’s history of outsourcing. The tech giant outsourced its manufacturing activities to China and its customer service department to India.

Like Apple, tech-enabled companies and service providers are working hand in hand to provide and offer goods and services that will make everyone’s lives just a little bit easier.

From AI assistants to call center support, companies often rely on outsourcing partners to get the job done.

These companies have made an impact so big that other industries rely on them in order to get their products and services across the world.

Individuals rely on those services to make their daily lives easier and more convenient.

Healthcare industry

The healthcare industry is one of the busiest industries ever to exist. It’s not a surprise that they would adopt the practice as a business strategy that allows them to focus more.

From medical billing to insurance processing, the functions that aided the healthcare industry are part of the history of outsourcing. If it weren’t for external service providers, the sector would not become as efficient as it is today.

The influx of demand for quality healthcare makes partner companies even more dedicated to coming up with systems to push its development further. Experts are continuously working hard to come up with the next generation of ideas.

Finance industry

One of the most important and fastest-growing industries right now is the finance industry, especially the banking sector, where millions of people are using financial services all at once.

Banking institutions often outsource their software development and customer service departments to external service providers.

Many business process outsourcing companies that focus on banking have helped financial institutions develop a more rigid and more secure environment. 

One of the benefits that outsourcing provides is to ensure that banking systems are secure and safeguarded from malicious attacks, even if the partner company is offsite.

Healthcare industry

The healthcare industry is one of the busiest industries ever. It’s not surprising that they would adopt the practice as a business strategy that allows them to focus more.

From medical billing to insurance processing, the functions that aided the healthcare industry are part of the history of outsourcing.

Offshore outsourcing has played a crucial role in enhancing cost-effectiveness and scalability in healthcare services.

Businesses have leveraged outsourcing to streamline business processes, particularly in human resources, allowing companies to focus on core activities.

If it weren’t for external service providers, the sector would not become as efficient as it is today.

The influx of demand for quality healthcare makes partner companies even more dedicated to coming up with systems to push their development further.

Experts are continuously working hard to come up with the next generation of ideas.

Finance industry

One of the most important and fastest-growing industries right now is the finance industry, especially the banking sector, where millions of people are using financial services all at once.

Banking institutions often outsource their software development and customer service departments to external service providers.

Many business process outsourcing companies that focus on banking have helped financial institutions develop a more rigid and more secure environment.

One of the benefits of outsourcing is that it ensures that banking systems are secure and safeguarded from malicious attacks, even if the partner company is offsite.

The future of the outsourcing industry

The impact of outsourcing on various businesses across different practices has been widespread, to say the least.

The future of the outsourcing industry is evolving towards strategic partnerships that go beyond mere cost savings.

Organizations are increasingly leveraging outsourcing to focus on their core competencies while relying on external experts for non-core functions.

Contrary to popular belief, the public is in charge of the trends—customer satisfaction is one of the biggest factors when it comes to doing business with people.

In the age of information and communication, we still have to think about having sustainable business models that will allow future generations to enjoy the advantages of outsourcing.

This concept is highly regarded as a flexible model—ready to cater to any business from any sector.

Modern industries, led by innovators and business leaders, will rewrite the history of outsourcing as we know it. Future generations will look back at today’s accomplishments.