1.

What are types of outsourcing

The evolution of Outsourcing has led to a wide variety of Outsourcing services today. With a wide list of Outsourcing services, it is
important in learning - What is outsourcing, to uncover what the different types exactly are. Therefore, in this section, types of
Outsourcing will be discussed.

In the 19th and early 20th centuries, companies did not use Outsourcing as a business practice like today. There was no IT outsourcing at
all, in fact, Outsourcing was not even formally identified as a business strategy until 1989. The only type of Outsourcing that really
occurred during this period was when companies hired external suppliers for ancillary services. Unaware of the possible benefits of
outsourcing, this early Outsourcing only occurred because most organizations were not completely self-sufficient; they outsourced the
functions for which they had little to no competency internally. Publishers, for example, would often outsource printing and fulfillment
services. Whereas today, Outsourcing print needs is simply a business strategy, as Outsourcing is a way for organizations to reduce costs.
Also, Outsourcing takes many more forms today. Sticking with the print example, the forms of Outsourcing range from organizations
Outsourcing the placement of printers to Outsourcing printing and publishing jobs completely and on a print-on-demand basis. However,
Outsourcing as a business strategy only started to emerge during the Industrial Revolution.

The Industrial Revolution brought us specialization which in time brought us Outsourcing and changed the way companies did business.
During this period, companies started to answer that seemingly heavy question - why outsource? Here, Outsourcing more services
occurred because there was a rapid increase in the production of goods. The market for goods quickly expanded and profits were like
never before. This led more and more managers to ask and discover What is outsourcing? And here, companies started Outsourcing
accounting, insurance, engineering, and legal needs to specialized firms. Also at this point in time, Outsourcing to such specialized firms
only took place within the home country unlike today where offshoring is a popular business practice.

Outsourcing support services appeared to be the next round of Outsourcing services. By the 1990s, organizations began to focus more on
cost-saving strategies. This entailed functions necessary to run a company, but not specifically related to the core business. Here, managers
contracted emerging specialized companies to deliver Outsourcing services such as accounting, human resources, data processing, internal
mail distribution, security, and maintenance work. These specific Outsourcing services are still highly relevant today and commonly
involved in an answer to What is outsourcing?

Unlike the 19th and early 20th centuries, today, there are many different types of Outsourcing services that managers should understand
when wondering why outsource services anyway? These Outsourcing services are often grouped into five main categories: professional
process, manufacturing, process-specific, operational and project Outsourcing. These types of Outsourcing services can also now be found
outside of the country. Today, companies from the United States outsource to specialized units, organizations and individuals from all
over the globe. This type of Outsourcing can be referred to as offshoring, nearshoring or reshoring depending on the location. With more
and more types of Outsourcing services arising, Outsourcing in general has continued to grow in popularity as companies look to reduce
business costs while improving performance.

IT OutsourcingIT outsourcing, a type of professional Outsourcing, is one of the more common services outsourced today. It refers to the
practice of seeking technology related resources or subcontracting outside of an organization for all or part of an informational technology
function. Companies use IT outsourcing for functions ranging from infrastructure to software development, maintenance and support.
Almost every type of business today has IT needs or at least deals with technology on some level, which makes it so commonly
outsourced. A good example of IT outsourcing would be if a company outsources its IT management because it is less expensive to
contract a third party to do so than it would be to build its own in-house IT team. Or, an enterprise might outsource all of its data storage
needs because it cannot afford to or simply does not want to buy and maintain its own data storage devices. These two examples are
common for smaller or medium size organizations. Most large businesses only outsource a portion of any given IT function.

IT outsourcing is its own narrow field as businesses can also be involved in external domestic IT outsourcing and external international IT
outsourcing. External domestic IT outsourcing is often termed the baseline stage in the evolution of IT outsourcing. With external
domestic IT outsourcing, companies enter into an Outsourcing relationship with a domestic IT provider. Kodak's move to outsource its IT
needs to IBM in 1989 is an example of such an IT outsourcing relationship. Today however, companies are no longer restricted to
domestic IT outsourcing providers, which is where external international IT outsourcing providers come in to play. Today's wireless
wonder known as the Internet as well as low communication costs provide a basis for transferring IT activities to almost anywhere in the
world. This means internal IT outsourcing relationships are able to exist wherever the IT provider is located, which could be thousands of
miles away.

MultisourcingMultisourcing is another important term and provision of IT outsourcing worth exploring more. Multisourcing is a term
that can apply to any business area, but is most commonly used when referring to IT outsourcing and IT services, as it is the blending of
business and IT services from the main set of internal and external providers in the pursuit of business goals. It was first introduced by a
market technology research firm in 2005 and is most frequently used by large enterprises, where IT operations and technology
infrastructure are contracted to multiple vendors. This specific type of Outsourcing has recently become popular as multi-sourcing
leverages several "best-of-breed" specialist teams that are expert in and focus on a single IT management function. Multisourcing is also
known to be outcome-focused, well integrated and operates in a "partner" relationship manner, which gives it better visibility into real
project status information as well as little to no conflict of interests between functions. However, multisourcing requires you to have a
strategy, a network of relationships and governance as well as requires creating measurements that matter.

Process-Specific OutsourcingOther Outsourcing services can be specific to a process or internal procedure, which is commonly referred
to as process-specific Outsourcing. Today, it is very common to outsource specific operation-related aspects to other companies or units
that specialize in that specific service. For example, a bakery can outsource the delivery of a packaged cake to a courier company like UPS
or FedEx. Such an Outsourcing contract would then involve details on delivery timelines, customer contacts and costs, which then allows
each company to focus on its strength and improve customer service all while reducing costs and time. Process Outsourcing is also used to
describe the practice of handing over control of public sector services such as (fire, police, armed forces, etc.) to for-profit corporations.

BPOBesides professional process Outsourcing, manufacturer Outsourcing and process-specific Outsourcing, there is also Outsourcing
services for operational activities. This specific type of Outsourcing is more common within a manufacturing context than in other
industries, as the nature of manufacturing provides opportunities for specific operational activities to be handled outside of companies. For
example, machine maintenance and equipment repair can be acquired through Outsourcing services or even specialized IT outsourcing
services that specialize in that specific type of equipment or machinery. Other types of operational activities can include landscaping,
cleaning services, facilities maintenance or property management.

Offshore OutsourcingIn the 19th and early 20th century, it was normally unheard of to outsource to a specialized unit, individual or
specialized company outside of that country. Today however, the notion of Outsourcing (and especially IT outsourcing) outside country
lines is highly common and even encouraged as a smart business strategy. Such business practices are referred to as offshoring,
nearshoring and also reshoring depending on the location. It is important to understand the differences between each.

The practice of offshoring means having the outsourced business functions done in another country. This type of Outsourcing grew in
popularity before nearshoring and reshoring did. Work is often offshored in order to reduce labor expenses. Sometimes outsourcing is used
as a strategic way to enter new markets and tap talent unavailable domestically or as an attempt to overcome current regulations within the
home country that prohibit certain activities. India, Indonesia and China have emerged as dominant countries for Outsourcing offshore. A
major reason why offshoring became possible and quite appealing to U.S. industries was due to the global ubiquity of the Internet and
massive telecommunications capacity in the 90s and on.

ReshoringIn the recent past, companies thought sending manufacturing jobs from the US to areas like China and India were low-cost, and
a no-brainer Outsourcing move. However, now many of these manufacturers are beginning to realize that offshoring production services
to countries like China and India may not be as cost-effective. As companies asked the question - What is outsourcing, more and more,
this realization led US-based companies to start bringing their offshore manufacturing capacity and jobs back home. This process is
referred to as reshoring. It can be summed up as the reversal of Outsourcing or the transfer of a business operation back to its home
country. There are some benefits to reshoring, such as the rising cost of oil, which has impacted shipping costs is not a problem with
reshoring. Companies also have to account for duties, custom charges, long shipping times and time delays with offshoring, which adds
stress to cash flow and can even increase the cost of goods for consumers or businesses. Some Companies go even further and do what is
called insourcing—the opposite of Outsourcing. This entails bringing previously outsourced processes handled by third-party firms in-
house, and is sometimes accomplished via vertical integration.

2.What is outsourcing as a business strategy

It improves efficiency, cuts costs, speeds up product development, and allows companies to focus
on their “ core competencies”.

To many people, outsourcing is a frightening proposition. Yet this new business model, which has been adopted
worldwide across both the private and the public sectors, provides multiple benefits. It enables an organization to
achieve business objectives, add value, tap into a resource base and mitigate risk. In other words, from individual
items all the way to systems management, choosing to use external providers allows the company or organization
outsourcing a job (the “client”) to focus on what it does best.

Problems arise from the lack of, or poor, governance practices.

While the common public stereotype of outsourcing may be to make financial savings by taking advantage of
lower-cost labour in another country (known as “offshoring”), outsourcing can be domestic as well as foreign. It can
also give the client access to expertise and to a level of productivity not available in house. When a skills or
production deficit exists (frequently in information technology) and the service provider can furnish a remedy, an
outsourcing solution can meet the needs of both parties.

Statistics on the subject are an eye-opener. Accounting and consultancy firm Deloitte recently published its
free 2014 Global Outsourcing and Insourcing Survey, which covers the political implications, regulations,
outsourcing destinations, technology and vendor management. For example, the udemy.com platform for online
courses published some revealing statistics for 2013. In that year, 43 % of the IT sector had been outsourced. This
jumped to 60 % in the following year.

Deloitte also predicts outsourcing will continue to expand at rates of 12 % to 26 % across the functions analysed.

Economies of scale

Though the “father” of outsourcing may well be the early 19th-century British economist David Ricardo with his
economic principle of “comparative advantage”, it was only in 1989 that imaging solutions company Eastman
Kodak took the then revolutionary step of outsourcing its information technology systems.

Up until that time, the ideal model for business was a large and well-integrated company that owned, managed and
directly controlled its assets. But large corporations found themselves unable to compete globally as bloated
management structures hindered flexibility. Diversification became a rallying cry to broaden corporate bases and
take advantage of economies of scale. For many large companies, this resulted in a strategy of concentrating on
core business and competencies, identifying what was critical to the company’s future growth and what was not.

Assessing risk and reward

While outsourcing might appear to be an ideal solution for entities desirous of keeping overheads as low as
possible and that infernal “head count” down, there are also perils to avoid.

Many studies have been carried out to examine the pros and cons of outsourcing. Booz Allen Hamilton, a leading
management and technology consultancy, issued a report in 2014 describing “a mixed report card on traditional
outsourcing”. It nevertheless pointed out: “Savings typically result because the outsourcing supplier can access a
cheaper, more flexible workforce and the latest, most efficient technology. Organizations claim that they achieve,
on average, a 15 % cost reduction through outsourcing.”

Datamark Incorporated, which delivers enterprise content management services to Fortune 500 companies, backs
these claims. In its 2014 White Paper, it performed single-year and multi-year cost analyses for “individual item”
business process outsourcing decisions. Taking a representative sample from the businesses under study,
Datamark found cost savings of 31 % on a single-year cost analysis, while a three-year study of the same sampled
business showed savings of 33 %. This obviously represents a very significant decrease in expenditure for some
businesses and gives impetus to others to follow this attractive business model.

How ISO can help

ISO 37500 addresses issues of flexibility in outsourcing arrangements.

Adrian Quayle, outgoing Chair of project committee ISO/PC 259, Outsourcing, and Dr. Gargi Keeni of Tata
Consultancy Services spoke to ISOfocus. Quayle explained that it had become apparent that standards makers
would need to tackle the issues now arising from this business practice. ISO/PC 259 was created in response to
the wide range of methodologies that developed at the inception of the outsourcing industry. These had invariably,
over time, come to cover similar processes and themes. Following a pan-European survey conducted by the
Netherlands standards body NEN, a proposal to develop an ISO International Standard was made.

Outsourcing practitioners were looking for a common vocabulary across all industry sectors, including typical
outsourcing concepts, to improve the understanding of all stakeholders involved in managing the outsourcing life
cycle.

This ultimately led to the drafting and publication of ISO 37500:2014, Outsourcing, whose authors were
experienced sourcing/outsourcing practitioners involved in deals worldwide. Great pains were taken to ensure the
standard provided a generic and industry-independent foundation, so that it may in the future be supplemented and
tailored to suit industry-specific needs.

A collaborative spirit

Among the experts who were called upon, Dr. Keeni was a key contributor. As she told us, “It was a challenge to
accommodate the viewpoints of all stakeholders, in the public and private sectors.” Nevertheless, she praised the
collaborative spirit of all, which was key to resolving conflicting points of view over complicated requirements, in
particular regarding whether innovation and continuous improvement should be factored into the life cycle, or if the
importance of not infringing contractual requirements should take precedence.
Quayle, for his part, explained, “As well as focusing on the common processes and best practices for success, the
team put governance at the heart of the standard. Experience has shown that many of the problems arise from the
lack of, or poor, governance practices.”

ISO 37500 addresses issues of flexibility in outsourcing arrangements, accommodating changing business
requirements. The risks involved in outsourcing are confronted to enable mutually beneficial collaborative
relationships.

All sides of the outsourcing industry were invited to participate in the writing of the standard. Although the
document is very much sector-agnostic and addresses outsourcing independently of the size of the organization,
the experiences gathered by experts from an array of industries, including manufacturing and the information
technology enabled service (ITeS), were highly valuable when putting the standard together. No doubt that, as ISO
37500 gains popularity and traction, even more sectors will weigh in and provide their know-how for the next
revision of the standard.

Future looks bright

Over the past 25 years, the outsourcing industry has grown from nothing to a multi-trillion US dollar business
worldwide. As a consequence, ISO will need to expand its involvement to cover the myriad ways outsourcing is
being implemented.

The economies of scale, financial rewards, as well as the flexibility and increased productivity promised by
outsourcing, will be a hot commodity for years to come, as the skyrocketing rates of increased outsourcing affect
every segment of society.

Initially focused on highly transactional back-office processes or non-critical services, outsourcing now
encompasses strategic functions, with some companies off-loading entire segments of their value chain.

So what does the future hold? As outsourcing spreads exponentially throughout the world, issues that have not yet
come into existence will inevitably arise. ISO’s job will then be to monitor developments and trends and create
standardized solutions to help all stakeholders find a way around – or over – the obstacles that block their path.

3.what are the outsourced activities/processes

Business Processes for Outsourcing: Core vs. Non-Core

Sergei Tiunov

General Director, Outsourcing Division

BDO Russia

The purpose of outsourcing is to ensure best practice in key business components such as data processing, supply-chain
management, warehousing, logistics, HR, accounting and other vital processes. By divesting themselves of these non-core
activities, companies are realizing that they can focus their energy on areas where they have the competitive advantage, while
differentiating themselves from their competitors and taking advantage of cost savings from the outsourced functions.

In this context we can divide all business processes into three categories:

 Core activities are the essential, defining activities of an organization. If the organization gave those activities to an
external party, it would be creating a competitor or dissolving itself.
 Critical but non-core activities, if not performed exceptionally well, will place an organization at a competitive
disadvantage or even create a risk. There are many examples of companies' failures to manage their logistics processes
adequately leading to product shortages and loss of market share. Logistics is a critical but non-core activity for a
producer, but it is a core activity for a transportation company.
 Non-core, non-critical activities supply no competitive advantage. Even if performed poorly, they are less likely
to seriously harm an organization in the short term, although they are still important. Examples include cleaning,
catering and security.

The increased focus on core business operations and developing competitive advantage has left companies wondering what
to do with their non-core, less strategic processes, such as distribution and inventory management, accounting and HR, credit
card processing and product testing. Although these processes are vital to the day-to-day operations of many organizations,
users view them as overhead functions that do not define their business and, therefore, contribute little to their identity
and bottom line.

This notion, however, is changing as outsourced processes help companies save money or increase productivity. In other
words, a non-core business process may start to contribute to the bottom line by being outsourced.

Companies are currently determining which functions or processes are core to their business, and which are non-core yet
critical. Competition and rapidly changing IT options are driving companies to realize the potential benefits of outsourcing
functions and processes to parties that specialize in these areas. The total number of processes that companies consider core is
inevitably shrinking, while the proportion of non-core yet critical processes will continue to expand as margins in a
competitive environment are squeezed and customer service becomes increasingly competitive.

Corporations must consider all their business processes as "mission critical," examining and optimizing them where possible.
Outsourcing non-core processes to vendors helps to accomplish this goal. Since these outsourced processes will then be in the
hands of a vendor for which they are core, the chosen vendor must be the best of its type, excellent at the processes it does.

Today's competitive corporation must optimize every process to achieve the best possible business performance.
The "core/non-core" definition merely distinguishes the processes that are best kept in-house from those that are best
outsourced. The issue is not which processes are important or unimportant, since all functions contribute to overall
performance.

In fact, the market tendency is to reconsider which processes make up the core set, and to outsource even some processes
previously considered as integral to the internal structure, such as accounting, tax reporting, debt collection, customer support
and so on. Using outsourcing effectively is therefore a great way to keep your business streamlined and functioning at the best
of its competitive ability.

4.What is readiness assessment in outsourcing

An Outsourcing Readiness Assessment helps determine the receptiveness of an organization towards

outsourcing, as well as the feasibility of the application or process being outsourced. Therefore it is
essential that an Outsourcing Readiness Assessment be conducted whether you are considering outsourcing a
specific business process or a technical aspect of IT development and support.

Outsourcing initiatives can encompass a broad scope of activities. They range from tactical short-term
projects oriented towards achieving cost savings to strategic long-term objectives directed towards
establishing permanent revenue and profit enhancement derived from the introduction of a global
perspective. Each individual initiative has to be analyzed and evaluated on its own merits. For example,
how prudent is it to outsource ALL technical knowledge and support for a critical core business application?
The answer to that question may largely depend on the nature of the business and not necessarily the
technology being outsourced. If the marketplace is fluid, dynamic, and subject to rapid change, then
outsourcing all technical knowledge is not appropriate, as the ability to introduce change is materially
restricted.

Blending Business Management with Technology

Outsourcing Readiness Assessment is a disciplined approach designed to assist in the analysis and evaluation
of the feasibility and desirability of outsourcing business processes and/or associated IT support services. In
almost all instances the assessment consists of a review of the business process itself and the technology
that supports it. Our approach assesses the business processes and associated technical IT support from
strategic and tactical, operational, and financial viewpoints with a risk assessment overlay applied across all
three viewpoints to determine which functions can be most cost effectively managed using outsourced skills.
Some of the questions raised and answered during a typical assessment are:

 Strategic & Tactical – Are the outsourcing objectives consistent with and do they correlate with the
long-term strategic and short-term tactical plans of the company?
 Operational – At a more granular level, what exact functionality is going to be outsourced and how
will it interrelate and integrate with the remaining resident functionality? How will this work?
 Financial – What are the cost benefits to be derived?
 Risk Assessment – What are the quantified risks associated with the contemplated outsourcing
initiative and are they incorporated into the service level agreement?

If we determine that outsourcing is the right direction for your business, or a mix of outsourcing be included
in your IT budget, PCS has a comprehensive list of services to offer. In several other cases, our clients call us
after they have been through an outsourcing readiness assessment to know about our services. In either
situation, PCS is able to offer the following services:

 Software development services using latest technologies such as .NET, SQL Server, SharePoint
 Services, Java EE, Oracle, and more
 Application development and management
 Conversions and migrations
 Remote customer support and ticket tracking
 Ongoing application maintenance and enhancement