What is outsourcing?
Outsourcing refers to a company that contracts with another company to provide services that might otherwise be performed by in-house employees. 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 service, and are often located overseas.
There are many reasons that companies outsource various jobs, but the most prominent advantage seems to be the fact that it often saves money. Many of the companies that provide outsourcing services are able to do the work for considerably less money, as they don't have to provide benefits to their workers and have fewer overhead expenses to worry about.
Outsourcing also allows companies to focus on other business issues while having the details taken care of by outside experts. This means that a large amount of resources and attention, which might fall on the shoulders of management professionals, can be used for more important, broader issues within the company. The specialized company that handles the outsourced work is often streamlined, and often has world-class capabilities and access to new technology that a company couldn't afford to buy on their own. Plus, if a company is looking to expand, outsourcing is a cost-effective way to start building foundations in other countries.
What is disadvantages of outsourcing?
- Lose of control
- Quality problems
- Slow response time
- Can't understand foreign accents
- >Slow resolution times
- Can't produce desired results
- Reduced sales
- Irritated customers
- >Irritated employees, unions, people within community
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- Outsourcing your non-core activities will give you more time to concentrate on your core business processes
- Offshoring can give you access to professional, expert and high-quality services
- With outsourcing your organization can experience increased efficiency and productivity in non-core business processes
- Outsourcing can help you streamline your business operations
- Offshore outsourcing can help you save on time, effort, manpower, operating costs and training costs amongst others
- Outsourcing can make your organization more flexible to change
- You can experience an increased control of your business with outsourcing
- Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these
- Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time
- Offshoring can help your organization save on capital expenditures
- By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work
- By outsourcing, you can cater to the new and challenging demands of your customers
- Outsourcing can help your organization to free up its cash flow
- Sharing your business risks is possible with outsourcing
- Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business
- Outsourcing can help your organization to cut is operational costs to more than half
1. Focus On Core Activities
In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Example: A company lands a large contract that will significantly increase the volume of purchasing in a very short period of time; Outsource purchasing.
2. Cost And Efficiency Savings
Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing.
Example: A small doctor’s office that wants to accept a variety of insurance plans. One part-time person could not keep up with all the different providers and rules. Outsource to a firm specializing in medical billing.
3. Reduced Overhead
Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.
Example: Growth has resulted in an increased need for office space. The current location is very expensive and there is no room to expand. Outsource some simple operations in order to reduce the need for office space. For example, outbound telemarketing or data entry.
4. Operational Control
Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.
Example: An information technology department that has too many projects, not enough people and a budget that far exceeds their contribution to the organization. A contracted outsourcing agreement will force management to prioritize their requests and bring control back to that area.
5. Staffing Flexibility
Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you’re done.
Example: An accounting department that is short-handed during tax season and auditing periods. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.
6. Continuity & Risk Management
Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.
Example: The human resource manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating.
7. Develop Internal Staff
A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.
Example: A company needs to embark on a replacement/upgrade project on a variety of custom built equipment. Your engineers do not have the skills required to design new and upgraded equipment. Outsourcing this project and requiring the outsourced engineers to work on-site will allow your engineers to acquire a new skill set.
Implication of outsourcing.
implications of outsourcing and offshoring for the productivity of business services in the
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