Outsourcing

WALT What is outsourcing? Scope of outsourcing Need for outsourcing Concerns over outsourcing

What is Outsourcing Outsourcing is the act of one company contracting with another company to provide services that might otherwise be performed by in-house employees. Tech Support is one of the most commonly outsourced industries

Outsourcing 1. Outsourcing involves contracting out: The term ‘contracting out’ refers to the process of procuring a good or service from a third party, in accordance with terms which are legally enforceable. 2. Generally Non-core business activities are outsourced: By outsourcing non-core activities they can improve and work on their core activities . 3. Processes may be outsourced to a captive unit or a third party: This is mainly used by MNC’s, because of their expansion globally they need to outsource other companies to help run the branches around the globe.

Scope of Outsourcing Outsourcing comprises of 4 key segments: - Contract Manufacturing - Contract Research - Contract Sales - Informatics. The term outsourcing has more popularly come to be associated with IT- enables services or Business Process Outsourcing (BPO). In fact, even more popular term is called as “call centers” providing customer oriented voice bases services.

Need For Outsourcing Focusing of Attention: The companies by outsourcing have time to just focus on few areas which have distinct capability or core competence. Quest for Excellence: Outsourcing gives firm the chance to excel themselves in the activities that they can do best in, and at the same time excel by extending their capabilities through contracting out. Cost Reduction: As the competition keeps increasing, the only way for firms to survive and gain profits is to reduce costs. Outsourcing helps out with this problem as the work is distributed to other companies, this in a way helps reduce cost.

Growth through alliance: In an “outsourcing” alliance, the smaller company often assumes the role of a single department within the larger company. In outsourcing alliances, it is a good idea to survey several managers within the larger entity to learn valuable information about what is important to the key decision-maker. Fillip to economic development: Outsourcing, stimulates entrepreneurship, employment and exports in the host countries.

Concerns over Outsourcing Confidentiality Outsourcing depends on sharing a lot of vital information and knowledge. If the outsourcing partner does not preserve the confidentiality and passes it on to competitors.

Sweat-shopping As the firms that outsource seek to lower their cost, they try to get maximum benefit from the low cost manpower of the host countries.

Ethical Concerns In order to cut costs, firms outsource manufacturing to a developing country where they can use child labor/woman in factories.

Resentment in the home countries In the course of contracting out manufacturing, marketing, Research and Development or IT- Based services, what is ultimately contracted out is “employment” or jobs. This may cause resentment in the home countries particularly If the home country is suffering form unemployment.

Outsourcing Plenary : What is outsourcing? Scope of outsourcing Need for outsourcing Concerns over outsourcing