Outsourcing is a business practice in which a company hires a third-party to perform tasks, handle operations or provide services for the company.
The outside company, which is known as the service provider or a third-party provider, arranges for its own workers or computer systems to perform the tasks or services either on site at the hiring company’s own facilities or at external locations.
Companies today can outsource a number of tasks or services. They often outsource information technology services, including programming and application development, as well as technical support. They frequently outsource customer service and call service functions. They can outsource other types of work as well, including manufacturing processes, human resources tasks and financial functions such as bookkeeping and payroll processing. Companies can outsource entire divisions, such as its entire IT department, or just parts of a particular department.
Outsourcing business functions is sometimes called contracting out or business process outsourcing.
Outsourcing can involve using a large third-party provider, such as a company like IBM to manage IT services or FedEx Supply Chain for third-party logistics services, but it can also involve hiring individual independent contractors, temporary office workers and freelancers.
How outsourcing works
For a company to effectively outsource responsibilities, it is important to focus on the business partnership as much the logistics. Outsourcing is about managing relationship more than service-level agreements, and is a partnership, not a purchasing project. Maintaining and securing a trusted relationship is essential in outsourcing efforts and is more complex than establishing service levels and relationships.
Some experts recommend placing extra emphasis on the exit clause of a service contract. It is important for companies to know when the contractual agreement inevitably times out and ensure that the involved parties fulfill their obligations and stick around until the contract is up.
Reasons for outsourcing
Companies often outsource as a way to lower costs, improve efficiencies and gain speed. Companies that decide to outsource rely on the third-party providers’ expertise in performing the outsourced tasks to gain such benefits. The underlying principle is that because the third-party provider focuses on that particular task, it is able to do it better, faster and cheaper than the hiring company could.
Given such benefits, companies often decide to outsource supporting functions within their businesses so they can focus their resources more specifically on their core competencies, thereby helping them gain competitive advantages in the market.
However, some companies decide to outsource for other reasons.
For example, they outsource because they’re unable to hire in-house, full-time employees with the specialized skills and experience needed to perform certain jobs.
Companies sometimes opt to outsource as a way to shift meeting regulatory requirements or obligations to the third-party provider.
Furthermore, more companies are looking to outsourcing providers as innovation centers. According to Deloitte’s 2016 outsourcing survey, 35% of respondents said they are focused on measuring innovation value in their outsourcing partnerships.
Types of outsourcing
There are several ways to outsource a business process, and depending on the process, one may be preferable over another. Broadly there are a few different types based on the distance between the two members of the relationship. These types are:
Onshoring. Relocating work or services to lower-cost location in the company’s own country.
Offshoring. Relocating work or services to third-party providers overseas.
Nearshoring. Relocating work or services to people in nearby, often bordering regions and countries.
Outsourcing agreements can also vary widely in scope. For certain processes, like programming or content creation, hiring freelancers on job to job basis might be appropriate. A company outsourcing their entire IT department will require a long-term partnership with clearly stated requirements.
For more details on our products and services, please feel free to visit us at: Search engine marketing India, Internet Marketing Company India, Internet Marketing Company New Delhi, Internet Marketing New Delhi, Online Marketing New Delhi.3 visits · 1 online