Outsourcing is the process of contracting out a business process, which an organisation may have previously performed internally or which the company deems necessary or important, to an independent organization, where the process is purchased as a service. The opposite of outsourcing is called insourcing, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to another business without necessarily insourcing that business process
Without question, outsourcing has fundamentallychanged the global businesslandscape. Not long ago, outsourcing was simplyviewed as a means to reducevarious operational costs. However, as competitionincreases and budgetswear thin, wise organizations are turning tooutsourcing to add value beyondlowering costs
Reduce and Control Operating Costs - The single most important tactical reason foroutsourcing is toreduce and control operating costs. Access to the outside provider’s lower coststructure, which may be theresult of a greater economy of scale or some other advantage based onspecialization, is clearly and simplyone of the most compelling tactical reasons for outsourcing.Additionally, companies that try to do everything themselves may incur vastlyhigher research, development,marketing and deployment expenses -- expenses that have to be passed onto thecustomer or taken off thebottomline. Today’s customers are too sophisticated to accept the cost representativewith an organization’sattempt to maintain singular control over all its resources
There are basically two methods to outsource things to a bettercompany that can do as we want even better than us. They are,• Outsourcing projects to companies.• Hiring manpower from companies and execute your projects.Both these methods have it’s own advantages and disadvantages.But it depends on your requirement to choose one among those. Forexample, if you are in need of software that can maintain yourbusiness operation, it is better to outsource the project to somecompany and ask them the end result. If you have some e-commercesite to maintain and to do customer support, it is better to hireprofessionals on those areas and make them work under your controlas it needs your control more than in the first one.
Outsourcing has generated much controversy in recent times for various reasons.Outsourcing has been resorted to with mainly for maximizing profits. Beforedeciding on outsourcing, the outsourcer should examine in detail the variousproblems that are likely to crop up. Some of the problems can be easily straightened,while others can result in the outsourcer finding itself in a no-way out situation..Chance to nurture in-house talent is lost:The employees of the outsourcer are deprived of an opportunity to develop skills andexperiences with respect to the task that is being outsourced.Loss of Managerial Controls:The service provider is a separately managed entity .The contract between theservice provider and the client may overlook certain factors, which could result in atotal mismatch of policies of both parties. It may be much easier for the client to getthe job done by its own employees rather than someone else over whom he has nocontrol.