Outsourcing is transferring business processes from one company to another.
The concept is to have the management or day-to-day execution of one or more business functions performed by a third-party service provider who is already in sourcing those same business processes.
A parent company uses the outside firm to provide a business function that could have been done in-house.
The aim of outsourcing is to make the business or organization more competitive by staying focused on its core competencies.
Benefits of outsourcing: oThe company functions on a continuous or ongoing basis rather than on any specific single project.
oIt enables companies to focus on their core business function.
Outsourcing takes care of ancillary functions in part or in totality.
This optimizes the company's growth based on its core or specific business.
oReduces operating costs by focusing on major business area.
This way, the capital funds always remain available for the core business instead of being diverted to other supporting portions of the business.
oImproves productivity and service by standardizing all operations and processes across your global portfolio.
The outsourcing vendor manages your global portfolio comprehensively, thus increasing the lifespan of your portfolio.
oOutsourcing when taken off shore gives you access to world-class capabilities.
You can leverage global resource networks to support your business.
It gives you another perspective or dimension to the existing business for more efficiency.
oWith the shrinking world and cross-culture across the world, it helps employees to assimilate efficiently in changing the working environment.
oIt fosters and sustains an exceptional safety culture, emphasizing training and employee morale.
oIf done on same premises/country, it provides an alternate career option to employees.
oCreates flexibility with the facilities to even provide support in times of industry uncertainty.
oSpeeds up work, shares innovations for best practices.
You can maintain competitive edge with new ideas.
oReduces risk and increases productivity.
oFrees many resources for other purposes for enhancing or expanding your business in other directions.
oCompanies can save 10-20% cost on an average with outsourcing.
Additional Benefits of outsourcing: oRenewed focus on core business.
oImproved customer satisfaction with improved processes.
oRisk reduction due to reliance on experts and infusion of new technology.
oProject enhancement and effective cost management through financial engineering.
oRenewed opportunities for employees with skill upgrade and access to newer skills.
oVisible cost reduction and avoidance of capital investment.
oAsset conversion.
Value derived from outsourcing facility management oValue and savings gained.
This occurs during initial transfer from in- to outsource as they do the job much more cheaply because of the availability of huge manpower and similarly larger global business.
oIncreased focus.
The management time and resources previously used on managing the facility can be used for research and development projects.
oIncreased flexibility.
It can eliminate fixed overheads and physical plant ownership, thus cutting costs.
Outsourcing, besides cutting costs, can build a virtual large company with a large work base with the entrepreneur as the sole employee.