Outsourcing evolution: from rock’n’roll era to the post-pandemic world

The business concept of outsourcing appeared roughly eighty years ago, in the 1950s. As you might know from sitcoms, it was the rebellious time to express yourself in the best way possible, and rock’n’roll was a great way to do it. The vibrant jazz and blues music helped to communicate millions' stories in a simple and minimalistic way. 

The timelapse of the 1950s is also known for economic growth, prosperity, and mobility. In fact, it was an emerging time for businesses to try something new and innovative to give their projects a second life after being inspired by energizing rock’n’roll. That is precisely how the concept of outsourcing was born, to have a fresh start. 

Surprisingly, most businesses did not see the ultimate benefit of outsourcing, and only progressive entities were involved in such activities. Yet, in the 1980s, everything changed … 

The birth of outsourcing

The underlying force causing the adjustment to the outsourcing concept was the concept developed in the 1970s. More precisely, it was the strategy with a "focus on core competency."

The growth of outsourcing in the 1980s was primarily driven by the "focus on core competency" strategy developed a decade earlier, in the 1970s. Since then, outsourcing has become an integral part of the business activities that help businesses flourish, thrive, and, most importantly, compete effectively. 

The concept of outsourcing in the 1980s strategically differs from the outsourcing that is familiar to us in 2022. Let’s dive into the history (or perhaps, herstory) of outsourcing and see how it developed over the past fifty years.

The 1980s

As you might have guessed, the first stage of ‘outsourcing’ took place in the 1980s, a time when it evolved and became sort of a "hype." In historical terms, "traditional outsourcing" was aimed at non-core activities used to reduce extra and unnecessary costs and maximize profit. 

This notion sounds familiar, right? A vivid example of traditional outsourcing would be hiring a sourcing agent from Asia, as the minimum wage there is lower, and the understanding of the local culture is better. We should keep in mind that intercultural communication is a thing, and we should minimize miscommunications and misunderstandings to the minimum. In other words, you pay less to the ‘outsourced’ worker and receive more profit as they resolve issues efficiently and effectively, according to your business needs. 

Undoubtedly, the traditional approach to outsourcing can be applied to raw materials. For instance, it can be raw materials for business or perhaps frozen food that is already cut into pieces and only needs to be cooked. This time-efficient technique is used by most restaurants that do not have the resources to have fresh products—for instance, serving seafood dishes in Colorado or Kansas. 

The 1990s-2000s

The second stage of outsourcing rose from the early 1990s to the early 2000s. It was also for a decade, similar to the first ‘grand’ stage. In this period, outsourcing underwent a so-called transformation from a traditional to a strategic approach, involving more developed communication of a business's wants, needs, and goals. 

So, what is strategic outsourcing? In simple terms, outsourcing is based on the strategic business processes that directly impact business activities and how the business performs in the market (its ability to compete with rivalry). It is not surprising that strategic outsourcing was a breakthrough as its primary focus was on accessing external enterprises rather than being aimed at cost optimization. 

For instance, a person providing marketing or tax accounting consultancy services but residing in a different country would illustrate strategic outsourcing. Why is that so? The reason is simple: marketing and accounting departments are integral entities without which businesses could not operate, function, and survive. Imagine how you would advertise your business if there were no marketing expertise. It's nearly impossible!

The 2000s - 2022

The most up-to-date outsourcing concept we know (and perhaps use in business activities) is transformational outsourcing. What is the deal here, you might ask? The answer is pretty straightforward. Let’s get into it! 

In a nutshell, transformational outsourcing provides the ‘flexibility to adopt new technological advances and rapidly changing business needs,’ as meticulously described by Usifoh, n.d. Suppose you have experience in a startup environment. In that case, this approach is a perfect match, as the business needs could change rapidly at the speed of a rocket.

To understand more deeply how transformational outsourcing works, imagine the following example. Suppose that there is a Mister X, running a successful company, but suddenly you bump into the common bottleneck—the absence of modern IT technology. It restrains the rapid growth of his business, and Mister X feels stuck in the past. To resolve the issue, Mister X decided to partner with a high-end IT company and recruit some new tech-savvy employees. The new software infrastructure and education of employees with an emphasis on modern technology improved business operations, allowing the company to expand in the market. Mister X turned out to be a fantastic leader who has brought the business performance to the next level! 

Through transformational outsourcing, firms can increase profits, grow market share, and improve shareholder value. Re-engineering business processes is the future, and we could not agree more with it!