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One of the most common and highly used terms in business firm in last decade or so is outsourcing. Globalisation and new technological competitions have made the companies difficult to maintain range of expertise in skill in all areas to be a successful competitor. With the emergence of third world multinational companies the level of competition has become even more difficult and important issue. The best solution for this problem is outsourcing
Outsourcing is the contracting out of any task, operation, job or process that was originally performed by employees within your company to a third party for a significant period of time. These outsourced functions can be performed by the third party on-site or off-site.
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.
Advantages of Outsourcing
Overall Cost Advantage: It eludes the need to hire individuals in‐house; hence recruitment and operational costs can be minimized to a great extent. It reduces the cost and also saves time and efforting on training cost.
Stimulates Entrepreneurship, Employment, and Exports: Outsourcing stimulates Entrepreneurship, Employment, and Exports in the country from where outsourcing is done. Look at the example of India. After the initial success of call centres, there was a sudden emergence of many small scales and medium scale BPo and KPO companies.
Low Manpower Cost: The manpower cost is much lower than that of the host country. This is exactly the case with India. We have a very large educated workforce. And this causes the labour cost in our country to be much lower.
Access to Professional, Expert and High‐quality Services: Mostly, the tasks are given to people who are skilled in that particular field. This provides us with a better level of service and fewer chances of errors or misjudgment.
Emphasis on Core Process Rather than the Supporting Ones: With its help, companies can focus on their core areas which lead to better profits and increase the quality of their product. They simply outsource ancillary services.
Investment Requirements are Reduced: The organization can save on investing in the latest technology, software, and infrastructure and let the outsourcing partner handle the entire infrastructure.
Increased Efficiency and Productivity: There is an increased efficiency and productivity in the non – core areas of an organization.
Knowledge Sharing: Outsourcing enables the organizations to share knowledge and best practices with each other. It helps develop both the companies and also boosts goodwill in the industry.