Outsourcing involves transferring tasks, services, or production from in-house operations to external firms, primarily used to save costs and improve efficiency in companies. The practice has significant benefits, including budgetary cuts, risk mitigation, and allowing companies to focus on core activities while reducing overhead costs. However, it also presents challenges such as potential job losses, loss of internal competencies, and the complexities of managing new outsourcing relationships.

1. OUTSOURCING
PREPARED BY:
MOHAMED HUDAIF T
DEPT. OF SOCIAL WORK
PONDICHERRY UNIVERSITY

2. “Another firm’s employees carrying out tasks
previously performed by one’s own
employees”.

3. • Outsourcing is a practice in which an
individual or company performs tasks,
provides services or manufactures products
for another company functions that could
have been or is usually done in-house.
• Outsourcing is typically used by companies to
save costs.

4. • Outsourcing is a common trend in information
technology and other industries.
• Businesses outsource for services that are seen
as intrinsic to managing a business and serving
internal and external customers.
• Products, such as computer parts, and services,
such as payroll and bookkeeping, can be
outsourced.

5. • Sometimes, the entire information management
of a company is outsourced, including planning
and business analysis as well as the installation,
management, and servicing of
the network and workstations.

6. • In addition to saving on overhead and labour costs,
the reasons companies employ outsourcing include
improved efficiency, greater productivity and the
opportunity to focus on core products and functions
of the business.
• Furthermore, more companies are looking to
outsourcing providers as innovation centres.
• According to Deloitte's 2016 outsourcing survey,
35% of respondents said they are focused on
measuring innovation value in their outsourcing
partnerships.
Reasons for outsourcing

7. • Strategic Restructuring
Companies are revisiting their modus operandi
(operational model) and evaluating business
operations to look at ways to restructure and make
business units more efficient. Outsourcing should be
considered as one alternative which, if implemented
effectively, will play a key role in helping businesses
attain higher cost efficiencies.
Benefits of Outsourcing

8. • Budget Cuts
There is growing pressure on companies to trim
costs and reduce budget allocations for the year.
Budgetary cuts directly impact discretionary
spending which can be enforced without significantly
affecting day to day operations.
On the other hand, non-discretionary spending,
which is also coming under the knife, may lead to
outsourcing as a very viable option, as these involve
significant changes to how work or a particular
process is done.

9. • Risk Mitigation
Assessing and mitigating risk is key in any successful
outsourcing relationship – both from the customer
and provider perspectives. Being aware of the
risks involved and having an ability to monitor,
evaluate and manage these risks are critical.
this means also having the formal metrics or
processes for doing so.

10. •Focus On Core Activities
In rapid growth periods, the back-office operations of a
company will expand also. This expansion may start to
consume resources (human and financial) at the expense of
the core activities that have made the company
successful. Outsourcing those activities will allow refocusing
on those business activities that are important without
sacrificing quality or service in the back- office.
Example: A company lands a large contract that will
significantly increase the volume of purchasing in a very
short period of time; Outsource purchasing.

11. •Cost And Efficiency Savings
Outsourcing is a good option when organization
back- office functions that are complicated in nature,
but the size of the company is preventing
from performing them at a consistent and reasonable
cost.
Example: A small doctor's office wants to accept a
variety of insurance plans. One part-time person
cannot keep up with all the different providers and
rules, so the task is outsourced to a firm specializing in
medical billing.

12. •Reduced Overhead
Overhead costs of performing a particular back-
function are extremely high. Consider outsourcing
those functions which can be moved easily.
Example: Growth has resulted in an increased need
for office space. The current location is very
expensive, and there is no room to expand.
Outsource some simple operations in order to
the need for office space. For example, outbound
telemarketing or data entry.

13. •Operational Control
Operations whose costs are running out of control must be
considered for outsourcing. Departments that may have
evolved over time into uncontrolled and poorly managed
areas are prime motivators for outsourcing. In addition, an
outsourcing company can bring better management skills
to the company than what would otherwise be available.
Example: An information technology department that has
too many projects, not enough people and a budget that
far exceeds their contribution to the organization. A
contracted outsourcing agreement will force management
to prioritize their requests and bring control back to that
area.

14. •Staffing Flexibility
Outsourcing will allow operations that have seasonal
or cyclical demands to bring in additional resources
when organization need them and release them when
organization has done.
Example: An accounting department that is short-
handed during tax season and auditing periods.
Outsourcing these functions can provide the
resources for a fixed period of time at a consistent
cost.

15. •Develop Internal Staff
A large project needs to be undertaken that requires skills
that the staff of the company does not possess. On-site
outsourcing of the project will bring people with the skills
need in the company. The company workers can work
alongside them to acquire the new skill set.
Example: A company needs to embark on a
replacement/upgrade project on a variety of custom built
equipment. The companies engineers do not have the
skills required to design new and upgraded equipment.
Outsourcing this project and requiring the outsourced
engineers to work on-site will allow the engineers to
acquire a new skill set.

16. Demerits of outsourcing
• Creeping privatisation of the public sector reducing
government control
• Job losses
• Loss of internal competence to perform an
outsourced activity thereby making subsequent in-
sourcing of that activity problematic.
• Need to manage new relationships with the
outsource.
• Difficulty in deciding what and has much to
outsource.

17. THANK YOU…