by Outsourcing is contracting with another company or person to do a particular function. It means some companies may enter into an agreement with other companies to perform their activities at an agreed cost. Here the contracting companies may be benefited from the experience of the outsourcing company.
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.
The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has “made its presence felt since the time of the Second World War”,[6] often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).
The practice of handing over control of public services to private enterprises, even if on a short-term limited basis, may also be described as “outsourcing“.
Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country).
Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed, involving terms such as reshoring, inshoring, and insourcing.
Needs for outsourcing
In this troubled economy every rupee is precious. The business needs to control costs wherever possible. Outsourcing certain aspects of the business to third parties, can be a powerful cost cutting move that also frees up for more important tasks such as finding new clients and product development.
Cost and efficiency Savings
Back-office functions that are complicated in nature, but outsourcing enable the business to perform it at a consistent and reasonable cost.
Expansion and growth
Outsourcing helps to reduce the investment in backend activities. Hence the firm can use its resources for its further expansion and developmental activities.
Customer support
Having a live person to deal with customer questions and concerns is an important part of building the business’ credibility. When it is outsourced the call professionals can represent the business with authority.
Benefits of latest development
The outsourcer generally maintains a world class information technology and techniques. Therefore, the client company is also benefitted from the technical expertise of the outsourcing company
Focus on Core Activities
In rapid growth periods, the back-office operations of a company will expand also. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.
Scope of Outsourcing
The term outsourcing has more popularly come to be associated with I T enabled services or Business Process Outsourcing (BPO). We can classify the scope of Outsourcing into 4 major areas.
Advertising
Business firms generally depend on advertising agencies for designing developing and disseminating their products and services. Under the agreement the advertising agencies agrees to provide all the services associated with advertisement.
Financial Services
The firm may outsource various financial services like payroll preparation, Underwriting, Merchant banking etc.
Customer support Services
Customer service is the major area were outsourcing applicable. Almost all the companies outsource its after sale services and customer services. Call centers are the best example for the customer service outsourcing.
Courier service
Big firms generally depend on the courier agencies to dispatch their large amount of parcels.
