This is called outsourcing. Many large companies now outsource jobs such as call center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each of the services by means of contracts. Today more and more companies are resorting to outsourcing. This is attributed mainly to the increased efficiency and cost cuts. Earlier small companies and companies which were newly established would resort to outsourcing, but today even giants like IBM are making use of it.
In July 2002, a deal was negotiated between International Business Machines Corp. and Fidelity's Employer Service Co. According to the deal, Fidelity's Employer Services Co. unit was to take over key human-resources functions for 260,000 IBM employees and retirees. Fidelity was to hire 450 of IBM's 1,200 U.S. human-resources employees. Among the jobs Fidelity would handle for IBM were health-plan administration, career services and pension administration. IBM would continue to provide other functions in house, including payroll (Johannes L. and Armstrong D. 2002).
According to the article "The benefits of outsourcing for small businesses (n. d)", "Though reducing expenditure is not the prime reason for outsourcing, it is certainly a major factor. ...Show more