Outsourcing

Outsourcing is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity that specializes in that operation. Outsourcing is a business decision that is often made to lower costs or focus on competencies. A related term, offshoring, means transferring work to another country, typically overseas. Offshoring is similar to outsourcing when companies hire overseas subcontractors, but differs when companies transfer work to the same company in another country. "Outsourcing" became a popular buzzword in business and management

Benefits of Outsourcing

It is apparent that many organizations today are making the decision to outsource. In today's global marketplace outsourcing has made itself accessible to many organizations on a National and International level. Offshore outsourcing has provided many businesses with the opportunity to harvest the benefits of lower labor costs and to exploit the value of less than par foreign currencies. Through outsourcing companies today have the ability to develop competitive strategies that will leverage their financial positions in the ever competitive global marketplace. Some of the major advantages that today's organizations can expect to obtain through outsourcing are:

Ability to purchase intellectual capital

Through outsourcing, today's businesses have the ability to utilize the technological know- how of other organizations. This allows businesses to find the specific requirements they need to implement their target objectives.

Ability to better anticipate future costs

Organizations that choose to outsource have the ability to determine exact future costs. Prior to the contract development of any outsourcing agreement, the outsourcing company develops a request for proposal (RFP) document which highlights the major requirements and scope of the project which is to be outsourced. Through bids vendors have the ability to make offers to perform the outsourcing for the given project. When a bid has been accepted the organization has an exact figure illustrating what the expense will be to outsource the project.

Ability to focus on core competencies

Outsourcing allows businesses to delegate non-vital projects they need completed to vendors. This ultimately provides an organization with the ability to focus on distinctive core competencies which will help yield long term benefits. If an organization experiences long term advantages from well developed core competencies they are said to have achieved a sustainable competitive advantage.

Ability to lower costs

Overall outsourcing is viewed by many organizations as a strong business tactic that ultimately is a superior economical approach to developing products and services.

Types of outsourced work

Data analysis

Information technology operations

This is one of the newcomers in the outsourcing arena. The task basically involves the management of information technology assets of corporations from a remote location. For example the management of a computer network of a large corporation includes outage monitoring, alarms monitoring, remote monitoring of data centers, etc. The nature of these operations calls for a real-time support when the need arises. That means such tasks are not easily outsourced to the places in far time zones. Instead it's outsourced to comparable time zone locations, which are competitive. This need for the geographical proximity earned it a specific name Near sourcing.

Engineering design

Anything from design of huge refineries to wristwatch design can be outsourced. This is probably the next matured outsourcing process after the software development outsourcing. There are two types of business houses in this arena. The first is the captive design houses, which are design houses setup for the exclusive work of one client. There are different cases such as the parent company themselves setup the design center at a different (economically competitive) country or partner with another company at the outsourcing location or completely depend on the partners resources .

Customer support

Outsourced customer support has been a huge trend as of late. Small to large corporations have outsourced to support to companies that specialize in these services.

Medicare

This is often touted as the most promising yet contentious area of outsourcing. The services that can be outsourced in Medicare could be anything from the trivial keying in of the physicians transcript (in audio) of the treatment records into a structured documents to physically sending the patients to another country for treatment. Other services include using the service of radiologists at a remote but competitive country to interpret scan images such as CT or MRI.

Legal support services

Works outsourced in this field range from those in the techno-legal (such as drafting patent claims) to the keying in of legal transcripts (from audio) to structured legal documents. Patent application preparation is a painstakingly labor intensive process (searching patents all over the world) that demands special knowledge in the subject under patenting and the legal requirements. Nevertheless this is a multibillion dollar business and hence its place in the outsourcing arena.

Software development

This is likely the most talked about subject in the outsourcing field. Due to the nature of programming, the outsourcing of software development has evolved more rapidly than other areas of job outsourcing.

Art, animation and editorial

This is where the creative business finds its overseas partners at a competitive country. Anything from apparel design to cartoon animation in the creative business is outsourced. For example, creative houses are setup at competitive locations to get the animation of movies done. Another example is DTP work. The text transcript of a book can be sent to another country, where designing takes place