A Valuable Business Strategy
For your company to be successful, make sure you plan its innovation and cost-containment strategies well. Include offshore outsourcing as a part of the tactical mix. (Robinson, Kalakota 2005) Today’s business environmental, organisational, and technological factors require businesses to operate efficiently and effectively in order to be competitive. Toward those goals, managers employ many strategies to improve productivity, including standardisation, automation, and business process reengineering.
Additionally, they strive to restructure the business organisations to be lean and flat so that they can become flexible in responding quickly to changes in environment and customers’ needs. Outsourcing is another valuable strategy managers use to achieve efficiency and ensure competitiveness. Whenever a business procures resources purely from an external source to accomplish business objectives, it engages in outsourcing. The term ‘outsourcing’ is one that can be used to describe any external up-line function in a supply chain (White, Barry 1996).
For example, when a manufacturer acquires raw materials from a supplier, it engages in outsourcing; when a wholesale company contracts with an external delivery firm, it engages in outsourcing; when a firm hires a computer consultant, it engages in outsourcing, so on and so forth. Outsourcing involves hiring expertise from another firm, giving that firm responsibility for managing an essential business function, such as telecommunications… or data center operations. (Muller 2002)
Loosely defined, outsourcing is work done for an organisation by people other than organisation’s full-time or part-time regular employees. Outsourcing is essentially a long-term relationship between a customer and a supplier, generally being in excess of three years and in large-scale transactions often being for much longer than that. The supplier takes on responsibility for delivering a specific range of services to the client on a contractual basis (Bragg 1998).
Using external service providers to cut costs and improve performance has become truly commonplace in our day. The popular press may still focus on the debate over the real benefits of outsourcing, but no executive leadership team would deny that outsourcing is a vital and even integral part of successful operations today. Outsourcing does not always mean sourcing services from other countries, although this is how the term is often used in the popular press.
From a services perspective, outsourcing is contracting with external firms for the management and delivery of a defined set of services, whether these firms are located in one’s own country or in a neighbouring country or in some distant country located in Asia. Outsourcing has taken on a new emphasis in today’s business environment. In the interests of either efficiency or effectiveness, a modern organisation often contracts out entire business functions to other companies that are specialists in their specific fields.
A firm might turn over to external suppliers its human resource functions, its information technology functions, its shipping functions, or any other functions for which an external supplier is more efficient and effective than is the host company (Brown, Wilson 2005). While such outsourcing is not a new strategy — businesses have always used outside consultants — it has gained tremendous expanding scope in recent years.