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Assignment




Gouri S Babu









OUTSOURCING








INTRODUCTION

This era of information technology has opened several new job opportunities.
Outsourcing is such a new career prospect. Outsourcing means contracting with
organizations and agencies outside ones country for doing work that could
otherwise be done by employees within his own country. It is a practice used by
different companies to reduce costs of transferring portions of work to outside
suppliers rather than completing it internally. Outsourcing includes both foreign
and domestic contracting and sometimes includes off shoring or relocating a
business function to another country. Financial savings from lower international
labour rates is a big motivation for outsourcing or off shoring









OUTSOURCING

Outsourcing is contracting with another company or person to do a particular
function. Almost every organization outsources in some way. Typically, the
function being outsourced is considered non-core to the business. An insurance
company, eg, might outsource its landscaping operations to firms that specialize in
those types of work since they are not related to insurance or strategic to business.
The outside firms that are providing the outsourcing services are 3
rd
party
providers, or as they are more commonly called, service providers.
Two organizations may enter into a contractual agreement involving an
exchange of services and payments. Outsourcing is said to help firms to perform
well in their core competencies and mitigate shortage of skill or expertise in the
areas where they want to outsource. Although outsourcing has been around as long
as work specialization has existed, in recent history, companies began employing
outsourcing model to carry out narrow function, such as payroll, billing and data
entry. Those processes could be done more efficiently, and therefore more cost
effectively, by another companies with specialized tools and facilities and specially
trained personnel.
In the early 21
st
century, business increasingly outsourced to suppliers outside
their own country, sometimes referred to as off shoring or off shore outsourcing.
Several related terms have emerged to refer to various aspects of the complex
relationship between economic organizations or networks, such as near shoring,
crowd sourcing, multisourcing and strategic outsourcing. Outsourcing can offer
greater budget flexibility and control. Outsourcing organization pay for only the
services they need, when they need them. It also reduces the need to hire and train
specialized staff, brings in fresh engineering expertise, and reduces capital and
operating expences.
One of the biggest changes in the early 21
st
century came from the growth of
groups of people using online technologies to use outsourcing as a way to build a

visible service delivery business that can be run from virtually anywhere in the
world. The preferential contract rates that can be obtained by temporarily
employing experts in specific areas to deliver elements of a project purely online
means that there is a growing number of small businesses that operate entirely
online using off shore contractors to deliver the work before repackaging it to
deliver to the end user. One common area where this business model thrives is in
providing the website creation, analysis and marketing services. All elements can
be done remotely and delivered digitally, and service providers can leverage the
scale and economy of outsourcing to deliver high value services at reduced end
customer prices.
Currently, outsourcing takes many forms. Organizations still hire service
providers to handle distinct business processes, such as benefit management. But
some organizations outsource whole operations. The most common forms are
Information Technology Outsourcing (ITO) and Business Process Outsourcing
(BPO).
BPO encompasses call centre outsourcing, human resource outsourcing,
finance and account outsourcing and claims processing outsourcing. These
outsourcing deals involve multiyear contracts that can be run into millions of
dollars. Frequently, the people performing the work internally for the client firm
are transferred and become employees for the service providers. Dominent
outsourcing service providers in ITO and BPO fields include International
Business Machines Corporation (IBM), Electronic Data System (EDS), Computer
Science Corporation (CSC) etc.
Some nimble companies that are short on time and money, such as start-up
software publishers, apply multisourcing- using both internal and service provider
staff- inorder to speed up the time to launch. They hire a multitude of outsourcing
service providers to handle almost all aspects of a new project, from product
design, to software coding, to testing, to localization and event to marketing and
sales.


The process of outsourcing generally encompasses 4 stages:
1. Strategic thinking, to develop the organisations philosophy about
the role of outsourcing in its activities.
2. Evaluation and selection, to decide on appropriate outsourcing
projects and potential locations for the work to be done and service providers to do
it.
3. Contract development, to work out the legal, pricing and service
level agreement.
4. Outsourcing management or governance, to refine the ongoing
working relationship between the client and outsourcing service providers.
In all cases, outsourcing success depends on 3 factors:
Executive level support in the client organization for the
outsourcing mission.
Ample communication to affected employees.
Clients ability to manage its service provider.

The out sourcing professionals in charge of the work on both the client and
provider sides need a combination of skills in areas such as negotiation,
communication, project management the ability to understand the terms and
conditions of the contracts and service level agreements and, above all, the
willingness to be flexible as business needs change