Outsourcing is the transferring of a business process to a third party vendor. The service provider will take over the responsibility of day to day function and continuance of the assigned process.
There are several varied kinds of outsourcing. Several companies outsource some degree of functions, while others outsource complete operations. Let’s take Microsoft for example; their total manufacturing process is outsourced. Obviously, fees are part of outsourcing depending on the services necessary, and in cases like Microsoft, the contract can cost millions and billions of dollars, and it becomes frequent for the client’s employees to be moved to the supplier company. Companies such as IBM, HP, EDS and Accenture are some of the foremost outsourcing companies offering their services.
Outsourced entire operations fall into two (2) categories: Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO).
The former is further sub-divided into call centre outsourcing (CCO), human resource outsourcing (HRO), finance and accounting (FAO) outsourcing, and claims processing outsourcing (CPO).
1. Information Technology Outsourcing (ITO)
a. Call Centre Outsourcing (CCO)
b. Human Resource Outsourcing (HRO)
c. Finance and Accounting Outsourcing (FAO)
d. Claims Processing Outsourcing (CPO)
2. Information Technology Outsourcing (ITO)
Basically, every business process can be transferred over to outsourcing companies. The most widespread processes that are outsourced are marketing and accounts, manufacturing, recruitment, switch board, web design and maintenance, web hosting and IT maintenance, logistics and distribution, and editing.
There are innumerable motivations why a business ought to consider outsourcing. Several firms may not have the on hand skills needed to finish a process, handing over this process to outsourcing companies may assure a higher success rate rather than if the business itself runs it.
A further motive is that the process may be hard to control, in general, or possibly due to business growth. Veteran outsourcing companies already have the essential abilities and familiarity to administer the process for you. Moreover, the process can be executed better, cheaper, and earlier too.
If a company has sub-standard in-house service, which may or may not be linked to shortage of skills, or occasionally, a company may be short of the resources, or the resources are not available in-house at all, in order to complete the process, such as the case for smaller companies. Outsourcing companies can present the best solution.
Further reasons may be that you need your employees somewhere else in the business and the process may not add to competitive advantage. Outsourcing assists companies to modernize their business operations by allowing them to spotlight on core income generating activities.
Outsourcing companies provides firms access to expert capabilities, therefore leveling the playing field for smaller companies.
It lessens risks by distributing it between the company and the outsourcing vendor – who has the skills and experience for administering the risk better, giving businesses peace of mind that the process is in high-quality and dependable hands.
With outsourcing, companies do not have to be anxious about continually commencing new technologies to keep them competitive. An excellent outsourcing provider will already have this covered for them. Outsourcing releases human resources, allowing companies to spotlight their employee’s activities on more critical tasks. Outsourcing releases cash flow by transforming fixed costs to variable costs. Moreover, it boosts service quality, improves the control of your business, and allows the business more flexible to change/demand.