OUTSOURCING

BY Elifiyea,Glyniss,Joel R,Joel
G,Kartik,Michelle,Riya G, Sakshi , Saaju
CONTENTS
The entire spectrum of sourcing

Outsourcing,
To obtain components for products or services from
sources outside the organization.
In-sourcing,
Transfer tasks that were performed outside the
organization into the organization *
- Outsourcing to cheaper overseas, still geographically
closer locations , e.g. Canada and Mexico
HOW DOES 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.
WHY DOES COMPANIES OUTSOURCE

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.
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.
There are many reasons why a business may choose to outsource a particular task, job or a process. For example,
some of the recognised benefits of outsourcing include:

● improved focus on core business activities - outsourcing can free up your business to focus on its
strengths, allowing your staff to concentrate on their main tasks and on the future strategy
● increased efficiency - choosing an outsourcing company that specialises in the process or service you want
them to carry out for you can help you achieve a more productive, efficient service, often of greater quality
● controlled costs - cost-savings achieved by outsourcing can help you release capital for investment in other
areas of your business
● increased reach - outsourcing can give you access to capabilities and facilities otherwise not accessible or
affordable
● greater competitive advantage - outsourcing can help you leverage knowledge and skills along with your
complete supply chain

Outsourcing can also help to make your business more flexible and agile, able to adapt to changing market
conditions and challenges, while providing cost savings and service level improvements.
● 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.
Outsourcing involves handing over direct control over a business function or process to a third party. As such, it
comes with certain risks. For example, when outsourcing, you may experience problems with:

● service delivery - which may fall behind time or below expectation

● confidentiality and security - which may be at risk
● lack of flexibility - contract could prove too rigid to accommodate change
● management difficulties - changes at the outsourcing company could lead to friction
● instability - the outsourcing company could go out of business
● Lack of Customer Focus: An outsourced vendor may be catering to the
needs of multiple organizations at a time. In such situations, vendors may
lack complete focus on an individual organization’s tasks. And the
reputation of the organization may suffer as a result
● A Threat to Security and Confidentiality: The inside news of the
organization may be leaked to the third party, so there are security issues.
The leak of sensitive information may result in losses to the company and
also be an advantage to competitors.
● Dissatisfactory Services: Some of the common problem areas with outsourcing include
stretched delivery time and sub‐standard quality.
● Ethical Issues: The major ethical issue is taking away employment opportunities from
one’s own country. Instead of creating employment and wealth in the origin country it
gets outsourced to another country. In recent times this has been viewed by many as
unethical and even unpatriotic.
● Other Disadvantages: Include misunderstanding of the contract, lack of
communication, poor quality and delayed
services amongst others.
INSOURCING VS OUTSOURCING
Outsourcing trends and future directions

Although outsourcing had been viewed as a way to lower costs and gain efficiencies, it is
increasingly becoming a strategic tool for companies.

Leading companies understand that outsourcing some functions can help them gain a
competitive advantage by allowing them to access expertise or innovative technologies
they don't have in-house; or by helping them deliver products or services more quickly; or
enabling them to shift resources to the areas of the business that are most critical.
Outsourcing offers both cost-efficiency and increased workload flexibility.