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Outsourcing is the contracting out of an internal business process to a third party organization. The practice of contracting a business process out to a third party rather than staffing it internally is common in the modern economy. The term "outsourcing" became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another but not always. The definition of outsourcing includes both foreign and domestic contracting, and sometimes includes off shoring, which means relocating a business function to another country. Financial savings from lower international labor rates is a big motivation for outsourcing/offshoring.The opposite of outsourcing is called insourcing, which entails bringing processes handled by third party firms in-house, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to another business without necessarily in sourcing that business process.


Companies outsource to avoid certain types of costs. Among the reasons companies elect to outsource include avoidance of burdensome regulations, high taxes, high energy costs, and unreasonable costs that may be associated with defined benefits in labor union contracts and taxes for government mandated benefits. Perceived or actual gross margin in the short run incentivizes a company to outsource. With reduced short run costs, executive management sees the opportunity for short run profits while the income growth of the consumers base is strained. This motivates companies to outsource for lower labor costs. However, the company may or may not incur unexpected costs to train these overseas workers. Lower regulatory costs are an addition to companies saving money when outsourcing. On comparative costs, a U.S. employer typically incurs higher defined benefit costs associated with taxes to account for social security, Medicare, safety protection (OSHA regulations) and FICA taxes etc. than in other countries. On comparative CEO pay, executive pay in the United States in 2007 was more than 400 times more than average workersa gap 20 times bigger than it was in 1965. In 2011, twenty-six of the largest US corporations paid more to CEO's than they paid in federal taxes.However, it appears companies do not outsource to reduce executive or managerial costs. Companies may seek internal savings to focus money and resources towards core business. A company may outsource its landscaping functions irrelevant to the core business. Companies and public entities may outsource certain specialized functions, such as payroll, to ADP or Ceridian. Companies may find the same level of consumer satisfaction.

Import marketers may make short run profits from cheaper overseas labor and currency mainly in wealth consuming sectors at the long run expense of an economy's wealth producing sectors straining the home county's tax base, income growth, and increasing the debt burden. When companies offshore products and services, those jobs may leave the home country for foreign countries at the expense of the wealth producing sectors. Outsourcing may increase the risk of leakage and reduce confidentiality, as well as introduce additional privacy and security concerns.

(1) This Decision lays out in detail the conditions for outsourcing, rules for managing risks related to outsourcing, the scope of internal bylaws related to outsourcing, conditions for access to data and documentation and for carrying out on-site examination by the Croatian National Bank, the minimum contents of agreements with service providers, and the content of the documentation to be assessed by the Croatian National Bank. (2) The provisions of this Decision shall apply to credit institutions with registered offices in the Republic of Croatia which have been authorized by the Croatian National Bank, and to branches of third-country credit institutions which have been authorized by the Croatian National Bank to provide services.

The outsourcing industry is contributing much in the growth of the Indian economy significantly. A major rise has also been seen with the increase in software and BPO industries since the last two decades. It is providing employment to the people who are eligible, skilled and knowledgeable in this field. It is estimated that the Indian IT and BPO industry is going to cross $132 billion. Due to outsourcing services many Indian cities like Bangalore, Chennai, Kolkata, Mumbai, Delhi-NCR and Pune has become the IT giants supplying and offering jobs and IT professionals. The reason behind the growth of this is India is offering cost-effective services which are attracting the overseas companies and clients to march towards us. During the last two decades we are experiencing the boom in the IT sector and majorly in the BPO industry providing better employment opportunities and benefits to the employees. There are many factors like wage difference, language, trade rules, telecom infrastructure, business infrastructure etc. are helping the Indian economy to grow with the growth in these industries. The Small Business Support providing companies from the IT sector are also helping a lot in this.

It has improved the economy by offering employment to a big force of manpower. Since India has developed its internet technology and excellent communication with networking services we are now getting the projects from the international customers. As few years ago we were getting only some part of the operations like ticketing, payroll functions etc. If we talk about the IT services firms, they are also attracting the overseas customers towards them due to the excellent, affordable and fast support like Server Support Services, network management and remote IT infrastructure management. There are many benefits for the customers like they get a skilled workforce providing services 24 hours every day. The customer can focus on its core competencies and can easily customize its products and services. According to a server the IT and ITES exports are increasing the foreign exchange inflow. Another aspect of the growth of the economy is the resources availability and the nature of the business player.According to a report the GDP contribution of the IT and the ITES sector has increased up to 1.4% to 7% in 2008. The Indian outsourcing industry is growing rapidly and contributing in every field. It has also increased better working conditions and better employment aspects.