Outsourcing is the business practice where companies contract out selected operations to other companies that specialize in those operations in order to lower cost and improve efficiency. Though formally introduced as a business strategy in 1989, this practice’s origins began in the aftermath of World War II.

Outsourcing was born from the ashes of War and nourished by Industry.

Before World War II (1939-1945), most nations were largely self-sufficient, producing the great majority of what their populace consumed: food and apparel, minerals and machines. Trade did occur between nations where some items, such as coffee, spices, mineral ore, and luxury items, such as jewelry and perfume, were imported and exported.

The business model at the time were large integrated companies that “own, manage, and directly control” assets. These companies did not engage in outsourcing because international trade and global communications were not nearly as developed as these are now.

After World War II, there was an expansion in global trade propelled by the combine engines of American business and government, both sought to increase imports to war ruined Europe and Asia for those regions’ respective economic recovery.

Things took a turn in the 1950s and 1960s when the rallying cry was change! Business firms applied this through diversification, spreading corporate bases, taking advantage of economies of scale such as Japan which started supplying large quantities of textiles to the United States.

Companies then attempted to compete globally in the 1970s and 1980s by contracting out to more producers in Asia to furnish apparel and garments, which previously had been manufactured in the United States. It was the low cost of labor in Asia that served as the main attraction.  In time, overseas manufacturers became more technologically-sophisticated and American companies began outsourcing other products, such as electronics and automobiles.

During the 1990s, outsourcing expanded as other companies engage it as a strategy to lower their costs to keep up with the competition. These companies started to outsource those functions necessary to run a company, but not related specifically to the core business, to emerging service companies to deliver accounting, human resources, data processing, and security.

Today, business process outsourcing puts more focus on developing strategic partnerships to achieved improved results. Selecting outsourcing as a strategy is based more on who can deliver more effective results for a specific function, than on whether the function is core or commodity.

Previously, companies were reluctant to hand over core processes defined as anything that has to do with dealing with customers. As service companies strive to be more proficient; these core competencies, such as customer service, were also outsourced precisely because it is so important.

Outsourcing has become the current trend in how the companies in the nations of the world do business and modern economists declare that it’s irreversible. It is hoped that since its principles began after an age of conflict, outsourcing could very well be the agent for interdependency and cooperation towards mutual prosperity between peoples.

Outsourcing Solutions, Inc. – your outsourcing partner!


  1. “Offshoring, History”. 15 March 2004. Wikipedia: The Free Encyclopedia. Accessed June 27 2008. Link here
  2. Greenhouse, Steven. “Outsourcing: How Outsourcing Developed”. 1993-2008. Microsoft Encarta Online Encyclopedia. Accessed 26 June 2008. Link here
  3. Handfield, Rob. “A Brief History of Outsourcing”. 31 May 2006. Supply Chain Management Resource, North Carolina State University. Accessed 27 June 2008. Link here


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