Outsourcing
In an era of increasing competition and reduced margins, executives are looking for solutions that reduce costs while adding value at the same time. Many have turned to outsourcing as a valuable tool to accomplish their objectives. Whether they have outsourced information technology, human resources, manufacturing, distribution, customer service, payroll, accounts receivable or other functions, companies have come to rely on partnerships with firms that have valuable expertise in these areas.
Definition of Outsourcing:
Very simply outsourcing can be defined as a process in which a company delegates some of its in-house operations/processes to a third party. Thus outsourcing is a contracting transaction through which one company purchases services from another while keeping ownership and ultimate responsibility for the underlying processes. The clients inform their provider what they want and how they want the work performed. So the client can authorize the provider to operate as well as redesign basic processes in order to ensure even greater cost and efficiency benefits.
The Webster's Universal Dictionary meaning of "Outsourcing" is: "A company or person that provides information; to find a supplier or service, to identify a source". It is very important to be clear about what is meant by outsourcing. Outsourcing essentially refers to how things are done rather than what is done. It describes how for example IT services are obtained; not what the services are.
Advantages of Outsourcing:
The Outsourcing market is estimated to grow tremendously in the coming few years with an increasing number of companies planning to outsource both low end and high end jobs to offshore destinations. Also the number of companies providing outsourcing services is on the rise, thus resulting in larger variety. Due to the fact that more and more companies are outsourcing, the risks are getting smaller as businesses have more experience and clearer objectives. Besides Information that is readily available to the right people at the right time, and which enables them to act quickly and decisively, is critical to an organization's success in an increasingly competitive global marketplace.
Main advantages from outsourcing are described as follows:
- Focus on core competencies
- Reduce and control operating costs
- Gain access to world class capabilities
- Redirect free internal resources for greater returns
- Gain access to resources that are not available internally
- Accelerate reengineering benefits
- Handle functions that are difficult to manage or are out of control
- Make capital funds available
- Share risks
- Bring in a cash infusion
- Raise productivity without unnecessary investment.
- Delegate repetitive and time-consuming tasks.
- Eliminate backlogs.
- Accelerate re-engineering of operations and administration.
- Elimination of the headache of recruiting, hiring and managing clerical staff
- Remain flexible.