What is outsourcing


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What is outsourcing

  1. 1. http://www.offshoringtimes.comWhat is outsourcing?Outsourcing could be defined as the shifting or delegating a companys day to day operations or businessprocess to an external service provider, done in anticipation of a better quality, lower rates and in a sensegetting an edge over ones competitors. When a companys operations or business processes are outsourcedto firms in foreign countries, often to take advantage of cheap skilled labor, it is referred to as Offshoreoutsourcing or Offshoring.Where functions previously performed by an organisation are supplied under contract from a third party.Buying goods or services instead of producing or providing them in-house.While outsourcing is not exactly a new innovation, the shifts that have occurred recently in this space areworth noting. As the need for e-learning moves higher up on the IT and corporate training agendas,organizations are wont to take on the IT management burden of implementing a learning managementsystem (LMS).The concept of taking internal company functions and paying an outside firm to handle them. Outsourcing isdone to save money, improve quality, or free company resources for other activities. Outsourcing was firstdone in the data-processing industry and has spread to areas, including telemessaging and call centers.Outsourcing is the wave of the future.A long-term, results-oriented relationship with an external service provider for activities traditionally performedwithin the company. Outsourcing usually applies to a complete business process. It implies a degree ofmanagerial control and risk on the part of the provider.The transfer of components or large segments of an organizations internal IT infrastructure, staff, processesor applications to an external resource such as an Application Service Provider
  2. 2. Types of OutsourcingOne challenge every business enterprise faces nowadays is to find niches that generate themost income. Several companies are wary to venture on additional expenditures that do notpromise considerable yield. This is the main reason why companies resort to outsourcingactivities. Outsourcing is divided into three types: technology servicesoutsourcing, businessprocess outsourcing and knowledge process outsourcing.Technology Services OutsourcingDue to the fast-changing world, business enterprises find it necessary to invest onsophisticated technologies and systems. Technological innovations are fueling the rapidevolution of business and economic models. Companies have to adapt to these changes inorder to thrive in a competitive market. Some of these technologies include electroniccommerce, network infrastructures, applications, telecommunications and websitedevelopment. Investing on a whole new set of manpower to perform these tasks isapparently, an additional capital expenditure. In-house employees may perform suchfunctions but not as good as getting a third-party firm that specializes on the field and aresure to be more cost-effective.Business Process OutsourcingBusiness Process Outsourcing, more commonly known as BPO started back in 1995 duringthe advent of internet business. It involves operational functions such as customer relationsmanagement, equipments, accounting, human resources, logistics, procurement, security,documentations, insurance, health care, manufacturing, and media outsourcing. In BPO,specific tasks, especially those outside the core competency of a company, is outsourced toa third-party firm.BPO can be further divided into two: front office tasks and back office tasks. Front officefunctions are customer-oriented such as marketing, customer service and technical support.Back office tasks are more on internal work (e.g. billing, payroll, purchasing).Other operations outsourced by enterprises include multimedia, bookkeeping,consultancy,data entry, proof-reading and editing, as well as medical transcription. Asinternet technologies advance, so is business process outsourcing.
  3. 3. Knowledge Process OutsourcingA more sophisticated level of outsourcing relative to BPO is knowledge process outsourcing(KPO). This involves advanced research, analytical, and technical skills which means thatproviders are expected to work independently. It is also important to note that in BPO, allprocesses are still laid out by the client whereas KPO specialists are given managerialcontrol. Examples of KPO include: pharmaceutical research and development, intellectualproperty research, content writing, and database development services.Among the three types, KPO is the older form of outsourcing and usually involves short-termand peripheral projects. BPO, however, is considered as the most popular among the threetypes especially if one is to consider that most companies outsource business processes tooffshore locations such as the Philippines.Technology Services OutsourcingCompanies that utilize technology require sophisticated, quick-responding computer systems and softwarethat are flexible enough to respond to the increasing capabilities of technology and the rapid changes inbusiness models. Selecting the right technology partner is an integral part of many successful ventures.Following are the specific types of technology services. • Electronic Commerce ("eCommerce") • Infrastructure ("Networks") • Software ("Applications") • Telecommunications • Website Development & HostingBusiness Process OutsourcingWith globalization, enterprises have been challenged to find the niches where they add the greatesteconomic value to the worlds economy. As a result, enterprises have looked for ways to avoid makinginvestments in employees and infrastructures that do not have a high yield. As service providers witnessedthis development, they began to create whole enterprises based on narrow business processes. The term"BPO" (Business Process Outsourcing") was coined in about 1995 and became popular a few years later,accelerated by the explosion of Internet business. • Customer Contact (Customer Relations Management) • Equipment • Finance / Accounting • Human Resources • Logistics • Procurement / Supply Chain Management • Security
  4. 4. Human Resources, is becoming another sought after outsourcing area. Other areas of who and what is being outsourced is Document, Utility, Insurance, Secretarial, Consulting, Healthcare, Manufacturing, News and Media outsourcing. There are four types of outsourcing services: professional, manufacturing, process-specific and operational. Outsourcing services have grown in popularity as more businesses look to reduce their overhead costs while maintaining the same level of output or support. There are risks and benefits to outsourcing that must be considered when looking at different types of outsourcing services. The greatest benefit typically is cost reduction, because the company saves in both equipment and labor costs. The largest risks are related to quality and control. Professional outsourcing services include accounting, legal, purchasing, information technology support and other specialized services. This is the most common area for outsourcing services, because of the potential cost savings associated with this type of arrangement. The business has access to high quality resources while paying only for services actually provided. This substantially reduces the organizations overhead costs. OUTSOURCING PROCESS• A Glance at the Outsourcing Process• A Review of Process Outsourcing in India• About• BPO Management: A Trend Acting Fund Raiser• Business Process Outsourcing• Business Process Outsourcing Business• Business Process Outsourcing or BPO in Philippines• Business Process Outsourcing Process Management• Engineering Process Outsourcing• Financial Process Outsourcings• Find out What Business Process Outsourcing Deals with• Guidance on Outsourced Processes• Information Technology Process Outsourcing in India• Legal Process Outsourcing• Mortage Business Outsourcing• Offshore Business Process Outsourcing• Outsourcing Processes Overview• Process for Outsourcing• Process of Outsourcing• Process Outsourcing• Process Outsourcing Benefits• Process Outsourcing Companies• Process Outsourcing Consultans• Process Outsourcing PPT• Process Outsourcing Provider• Process Outsourcing Solutions: How to Benefit from It• Pros and Cons of Process of Outsourcing• Recruiting Process Outsourcing: A Changing Trend• Recruitment Outsourcing Process
  5. 5. • Recruitment Process Outsourcing• Services offered by business process outsourcing• The Basics of Business Processes Outsourcing• The Key to Success when dealing with a Process Outsourcing Industry• The need of Sales Process Outsourcing for your company• Understanding Accounting Business Process Outsourcing• Understanding Business Outsourcing Process• What is Business Process Outsourcing??• Why Should One Go for Outsource Process?• Working Of a Business Process Outsourcing Company What is Outsourcing? Outsourcing may simply be defined as an agreement or contract with a third party, to provide service to the concerned firm. This third party service provider may work remotely from a different geographical location or it may work at the same place. Outsourcing is often referred to as off shoring which is the same as outsourcing. The concept of outsourcing came into demand with the advent of many software companies and with the rise of Information technology. Since the companies needed a way to handle a huge number of customer service departments, the concept of outsourcing evolved. Types of Outsourcing Processes There are different types of outsourcing depending upon the need of the firms. Some of them are – Business Proces Outsourcing (BPO), Account Process Outsourcing, Recruitment Process Outsourcing (RPO), Knowledge Process Outsourcing (KPO) etc. These different types of outsourcing basically helps in providing services to the customers by handling tasks like maintenance, payroll, research management etc. Different methods of Outsourcing Processes Companies have adopted different method of outsourcing to meet the demands of the customers. Usually the companies hire skilled workers at a low costs and divide the whole work into different segments, so that they can work with ease. One important method of outsourcing which the companies have adopted is call centers. At call centers a number of skilled people are employed to answer the query of their customers. The employed people are paid salaries which are less compared to what the firm would have to pay for in their own countries. Benefits of Outsourcing Processes There are a number of advantages of Outsourcing; some of them are listed below: 1. The greatest benefit is that outsourcing helps the organization to gain a lot of profit, since the operating cost is reduced.
  6. 6. 2. The service provided is not of low quality, as the service is being provided by experiencedthird party service providers.3. Outsourcing also helps the organization to work at a number of projects at the same time.The firm does not have to concentrate on one particular project at a time, since outsourcinghelps in reducing some of the burden from the company.4. It is not only the firm who profits from outsourcing. Even the third party service providersgain a lot of profit. Usually these service providers are from countries like India, China, andMalaysia etc and with outsourcing the need of job in these countries are fulfilled and thesalary and incentives are satisfactory.5. Another important benefit is that outsourcing provides flexibility to the company. It meansthat the company can easily adapt to any situation or demands of the market and thecustomers.Outsourcing simply means contracting out work, either essential or non-essential, toa third party who is specialized in that particular task, located either in the samecountry or overseas. When the service provider is located in a different country theoutsourcing process is more specifically termed Off sourcing. Outsourcing or offsourcing is a constantly growing industry estimated at $20 billion currently, and thebiggest chunk of this outsourcing pie is received by emerging economies like India,China, Brazil, Philippines and Mexico. So what are the various types of outsourcingprocesses and how can an enterprise benefit from them?Outsourcing is of multiple types, like Business Process Outsourcing (BPO),Knowledge Process Outsourcing (KPO), Medical Outsourcing, Accounts ProcessOutsourcing, Legal Process Outsourcing (LPO) etc. In BPO, which is the mostcommon form of outsourcing or offsourcing, the non-core tasks like payrollmaintenance, house keeping, and customer support are handed over to companieswith proven expertise in the field. Similarly, a company would want to outsource itsaccounting processes to a service provider in India or other country. With more than1.8 million patents being filed annually, Legal Process Outsourcing or LPO has alsoemerged as a booming industry. Legal services can be obtained for far lower rates inIndia than in the US and are of the same high standards. Not just patents, evenroutine legal services like filing affidavits, are being outsourced to third parties aspart of LPO.Some companies specialize in providing knowledge oriented services relating toresearch and e-education, making up the blossoming knowledge Process Outsourcing(KPO) sector. Even hospitals havent lagged behind other sectors and are activelyoutsourcing medical transcription and billing processes to cheaper destinations likeIndia. In fact, medical transcription is offering a new window of opportunity to many
  7. 7. young persons in the developing world, especially females, to earn a steady incomefrom a moderately skilled job.So what are the Benefits of Outsourcing?Outsourcing has many obvious benefits like reduction in overall operating costs of anenterprise. By outsourcing the non-core tasks like housekeeping to a third party, thecompany can concentrate on its core areas, say, software development. Also fixedcosts like employee salaries and benefits can be turned into variable ones as thecompany no longer needs to provide salaries, maternity leave, travel and dearnessallowance to employees who are on the payroll of the overseas service partner, allsuch essentials are the concerns of the latter. This represents tremendous savings incost, which is especially useful during financial downturns.Another benefit of outsourcing is that the same high quality service is provided bythe overseas service providers, so there is no question of low quality work for lowrates, as assumed by many. Moreover the members of the project team very quicklyimbibe the work culture of the US or UK based client company and also possessexcellent communication skills to complete the task in the shortest time possible.Outsourcing has also rendered continuous development possible, which meansworking in a constant cycle without interruption, cutting down on the developmenttime drastically. While the UK based team works during the daytime and sleeps inthe night, the India based team, which enjoys day, picks up on the task, thusrendering continuous development possible.Outsourcing also has certain invisible benefits like obtaining a foot hold in newmarkets, understanding the psyche of the people before introducing a new productor service in foreign land and also certain obvious financial gains in the form of taxbenefits, concessional land and so on. No wonder, outsourcing is here, not just tostay, but grow by leaps and bounds in the foreseeable future. Types of Outsourcing When you think of outsourcing you generally think of the companies that outsource their call centers, and customer service to other countries. But with technology today and companies looking to cut costs across the board, all parts of the business process are now being outsourced. Below you will find a few of the different types of outsourcing that are becoming more popular. 1. B.P.O: This is an abbreviation for business process outsourcing. This is also a very common term and most of the people know about it by now. Back office operations are performed by Countries like India, China, and Philippines for the major corporations based in Europe and America. This involves data entry, employee payroll and voice calling, thus termed B.P.O. 2. H.R.O: This term stands for Human Resource Outsourcing. It is being estimated that H.R.O may be the next big industry in the Asian market. H.R.O involves many activities like training employees and freshers, administrating benefits, travel and expenses management, payroll and risk management, compensation consulting, etc. Companies are having HR outsourced so that they can focus on their core competency. 3. R.P.O: the term is an abbreviation for Research process outsourcing. The biotechnology industries have been outsourcing their R&D work. India is one of the major countries where the research work is
  8. 8. outsourced. This is again because of the dollar rupee ratio. India may have an edge over others because of the professionals it has who work at lesser salaries than their western counterparts.Today most of the companies wants cost cutting in their business. Now a days Outsourcinghelps to achieve such goals. Outsourcing is the process of contracting with another companyor person to do a particular function. In top most cases almost organizations outsource theirproduct or services in some way. Typically, the function being outsourced is considered non-core to the business, this help them to concentrate on their original business.Outsourcing services can be categorized in two categories: BPO Outsourcing & KPOOutsourcing. The IT/BPO Company, for example, might outsource the services related to theinformation technology, business processing outsourcing and knowledge processingoutsourcing. Typical BPO outsourcing services are like as multimedia & animation,bookkeeping and financial services, business consulting, CAD/CAM, call center, data entry,DTP, typesetting, Handwriting services, HR services, internet marketing, legal services,medical billing, proofreading, editing, software & technology, transcription, web design & webdevelopment and writing & Translation. Some of typical KPO services are like as knowledgeprocessing outsourcing services, intellectual property research, animation & simulationservices, data research & analytics, litigation Services, medical content & services,pharmaceuticals services, writing/content development services and database developmentservices.The outside firms that are providing the outsourcing services are third-party providers, or asthey are more commonly called, service providers. For example ITMatchOnline.com, anoutsourcing portal is a kind of service provider for service buyer, which offers projects relatedto BPO Services, KPO Services and Information Technology. ITMatchOnline offers some oftypical popular outsourcing services like as call center, book keeping, drafting, internetmarketing, software development, writing, translation and web development.Currently, outsourcing takes many forms. Organizations still hire service providers to handledistinct business processes, such as benefits management. But some organizations outsourcewhole operations. The most common forms are information technology outsourcing (ITO),knowledge processing outsourcing (KPO) and business process outsourcing (BPO). Thechallenges of outsourcing become especially acute when the work is being done in a differentcountry (offshore), since that involves language, cultural and time zone differences.TRAINING PROCESS OUTSOURCING
  9. 9. Types of Offshore OutSourcingIt is broadly classified as: Product Component outsourcing Process Component outsourcing Software AcquisitionProduct Component outsourcingWhen a single developer is unable to develop the required product either due to lack of resources or inability to do so, theOrganization will outsource the whole or part of the project. This will enable the company to focus on other matters whichmay be more essential to the profitability of the business.Process Component outsourcingUnder this type of outsourcing, the external group is contracted to perform all the functions of the client’s processcomponents.Software AcquisitionThe activities are performed in a number of well defined steps. The steps that are followed here in a sequential order are: