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A Brief Look at the Beginnings of Outsourcing

A Brief Look at the Beginnings of Outsourcing

Outsourcing has grown explosively to become one of the most booming industries worldwide, with the global market size of its services pegged at nearly 90 billion US dollars.

Business, financial, and other sectors are also in constant and urgent search of top talents to work and help them reach their goals.

It has certainly gone a long way since it emerged in the earlier centuries and evolved in more revolutionary forms today.

To appreciate how this phenomenon came about, we’ll take a brief look at the beginnings of outsourcing.

19th and 20th Century 

Outsourcing in the Industrial Revolution in the 19th and 20th centuries came in the form of hiring external suppliers. 

During this era, business owners began outsourcing particular services, in contrast to employing them internally in the prior decades.

For instance, self-sufficient engineering, architecture, and insurance firms began to accommodate numerous clients. 

They then typically settled in the same city as the institutions they provided services for.

An example of this situation is the emergence of the Big Four in Great Britain: Pricewaterhouse Coopers (PWC) and Deloitte in 1849, and Ernst & Young and KPMG in the early 1900s.

They were birthed out of the legal and audit/accounting firms that outsourced related consulting jobs. 

Since the establishment of the Big Four, outsourcing accounting audit and legal practice became a regular and well-known trend for companies wanting to operate without interruption.

1980s

Computer enterprises pioneered the outsourcing of payroll services. 

As the 1980s came in, businesses who wanted to manage their expenses began outsourcing their billing, word processing, accounting, and other tasks more frequently.

IT outsourcing also believably came into popularity in the late 1980s, besides other kinds of outsourcing.

One of the first and most advertised occurrence of outsourcing was the Eastman Kodak data center that IBM provided.

The outsourcing included migrating hundreds of Kodak workers to IBM in 1989.

1990s

The advancement in information and computer technologies played a significant role in the beginnings of the outsourcing phenomenon.

In the 1990s, organizations started focusing on cost reduction.

Many of them outsourced tasks that were necessary and profit-boosting for their clients, such as accounting, data processing, and human resources.

The ones they kept in-house pertained to ownership and management of core responsibilities.

Services outsourcing also reasonably progressed due to the accessibility and abundance of robust and affordable communication facilities, following the rise of telecommunications in the late 1990s.

With this, and as services gradually became digital, it became feasible to move the physical locations for service delivery to low-cost ones in a way that was straightforward for end users.

While early outsourcing services were on medical transcription, data processing, customer service, and billing, software appeared to be one of the most significant.

The software service sector became the first to transmit critical activity to foreign regions, resulting in the generation of a notable bulk of resources and skills in concentrated localities.

The transnational networks that US immigrants built, the liberalization of rising market economies, and the breakneck Internet circulation all forged the pivotal outbreak of outsourcing in the 1990s.

Bottomline

The outsourcing industry now sees more modern trends, but it wouldn’t have reached this height if not for its small beginnings in the prior eras.

It may have taken different forms, but the concept of outsourcing remains and will likely keep progressing as technologies advance.

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