Outsourcing

Outsourcing is the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services. It is an increasingly popular strategy because it helps firms focus on their core activities and avoid getting sidetracked onto secondary activities.

The cafetaria at a large bank may be important to employees and some customers, but running it is not the bank's main line of business and expertise. Bankers need to focus on money management and financial services, not food service operations. That's why most banks outsource cafetaria operations to food service management companies whose main line of business includes cafetarias. The result, ideally, is more attention to banking by bankers, better food service for cafetaria consumers. Firms today outsource numerous activities, including payroll, employee training, and research and development.