Outsourcing is here to Stay - Essay Example

Outsourcing is here to Stay Outsourcing has been a part of business lexicon since 1980s. Outsourcing which is very common in today’s world normally refers to subcontracting a work which is mainly carried out to reduce the time, energy and cost incurred by a company or organization which is a third party, who intends to carry out a task. It involves transfer of management or day to day execution of an entire business function to an external service provider. Terms like off- shoring, near shoring, no shoring is normally used along with outsourcing.1 These terms are all subsets of outsourcing. Off-shoring refers to the task which is assigned to a third party based in another country away from the country who intends to carry out the work. With increase in globalization and the amount of task being outsourced, the difference between outsourcing and off-shoring is hardly felt. Counties like India and China have been two hotspots for carrying out outsourcing task. Central and Eastern Europe are attractive destinations, but costs are rising there, too. Offshoring is actually increasing in Africa and the Middle East, but political instability poses ongoing challenges there. With obstacles persisting in the field of outsourcing, the essay ‘Outsourcing is here to stay’ intends to highlight what is meant by outsourcing, why do we need to outsource, different types of outsourcing and issues concerned in outsourcing. The section on ‘types of outsourcing’ will have three subheads to have a better understanding. WHY DO WE NEED TO OUTSOURCE? The need for outsourcing a task varies based on the need. It could include one or more reasons mentioned below namely: lower costs (due to economies of scale or lower labor rates) variable capacity the ability to focus on core competencies by ridding yourself of peripheral ones lack of in-house resources getting work done more efficiently or effectively increased flexibility to meet changing business and commercial conditions tighter control of budget through predictable costs lower ongoing investment in internal infrastructure access to innovation and thought leadership 2 TYPES OF OUTSOURCING In our day to day use we get to hear different abbreviations like BPO, ITO and KPO. But what do they actually mean and where lies the difference? We need to look into the details of each and try to know the difference between these three different types of outsourcing. a. Business Processing Outsourcing (BPO) – it refers to outsourcing a specific business processing task. It can again be divided into two categories namely front office outsourcing and back office outsourcing. Front office outsourcing includes customer related services like marketing, technical support etc and back office support refers to services like billing or purchasing. b. Information Processing Outsourcing (ITO) - To impart information, information processing outsourcing too is being carried out both for front and back office support. c. Knowledge Processing Outsourcing (KPO) - Similar to ITO, we have the knowledge processing outsourcing units known as KPOs who by and large are knowledge based units who provide analytical, technical and have decision making skills. Pharmaceutical Research & Development units mainly fall under this category. ISSUES AND CONCERNS OF OUTSOURCING Even though outsourcing has been a very common concept in today’s world mainly for the developing countries like India, but there are a large number of issues pertaining to this sector. Many BPOs, ITO and KPOs have not been able to succeed in today’s world because of a huge competition. The clients who have been able to deliver quality resource have been able to succeed. Thus, there is a need to have quality assurance and quality check to successfully carry out the task. The other problem that one can foresee is the conflict that arises between the client and the vendor. The client intends to get better service, often at lower costs, than it would get by doing the work themselves. The vendor, however, wants to make a profit. That tension must be managed closely in order to ensure a successful outcome for both client and vendor. What is the best duration for outsourcing a task has always been of major concern. In the initial days out outsourcing, the contracts were of longer duration almost reaching 10 years. But then gradually they were shortened as there were more vendors available at cheaper cost that would provide better services. Truly speaking, the duration of the contract depends mainly on the type of work that needs to be carried out. Selection of a service provider who is capable enough to carry out the assignment is the most difficult task. One needs to be very sure on the type of task that needs to be carried out and whether the vendor that the client intends to hire has the potential or not. If the client is not sure whether to have a contract with that vendor then a second opinion is a must for successful completion of the task. There has been lot of debate on the loss of local jobs due to consolidation, improving efficiencies and lowering costs.3This issues need to be readily tackled if to avoid crisis at the political and economical level. CONCLUSION Looking at the large number of problems faced, there is a need to resolve the problems. Each client has to have a clear cut guideline which should clearly spell out the need for outsourcing. There is a need develop co-sourcing alliance which would mean that the project is handled both by the vendor and the client. Whatever the type of outsourcing, the relationship will succeed only if the vendor and the client achieve expected benefits. Work Cited Babu, M (2005) http://www.computerworld.com/managementtopics/outsourcing/story/0,10801,105828,00.html?SKC=management-105828 Accessed on 23rd March, 09. Manning et al (2008) A Dynamic Perspective on Next-Generation Offshoring: The Global Sourcing of Science and Engineering Talent Academy of Management Perspectives 22.3: 35-54. Overby, S (2007), http://www.cio.com/article/40380/ABC_An_Introduction_to_Outsourcing?page=1 Petal, M Disaster Prevention for Schools: Guidance for Education Sector Decision-Makers Consultation version. UNISDR, Geneva November 2008 Print. Sharma, S and Dey, Balaka Towards a Safer India: Education in Disaster Management, Central Board for Secondary Education, Delhi 2005 Print. Read More