OUTSOURCING BEST PRACTICES
INTRODUCTION
In today’s competitive markets companies have increasingly looked to outsourcing to increase their competitive edge, market share and profits. Models back in the 90’s were centred on the concept of one huge firm that does all the processes up until the end product. The result was that a firm had all the support services in house and this model was up until now a viable option. As the markets became more complex and competitive the need for cost cutting measures led to aggressive outsourcing in most sectors of the economy. Most companies saw that spending all resources on core processes was a competitive advantage. Outsourcing was not formally recognised as a business strategy until 1989 (Mullin 1996).
…show more content…
There are many advantages to use outsourcing as a business strategy. As a rule of thumb a firm must outsource those processes that are not core processes. Internal outsourcing is defined as the concentration of internal processes to create a single or smaller compact unit. Outsourcing has its own pros and cons, but ultimately the benefits exceed the costs hence the popularity of outsourcing in modern economies.
STRATEGIES FOR OUTSOURCING
When outsourcing they are fundamental things that one has to follow or adhere to in order to get the most out outsourcing. Now we take a look at some of the vital points in outsourcing. The following should form a basis for conducting an outsourcing procedure.
1. Internal champion: This is the one person in the group that understands the business process well from a macro and micro perspective. The advantage of having someone who understands such fundamentals is that when choosing a contractor (strategic partner) it eliminates the risk of choosing a non-viable option and they make the process easier because they know what the firm requires and what the partner can offer while looking at both the macro and micro
Because many businesses in the US have more often began outsourcing different business products instead of doing them in-house, it is important to understand why outsourcing may be the best option. Although many tie outsourcing to foreign markets, outsourcing can include both foreign and domestic markets. By entering into a contractual agreement, outsourcing allows organizations to pay for services they need. This gives the option for a business to get professionals to perform services for them that the business may not have the staff for. Outsourcing provides a cost saving-strategy that is usually more affordable. Ultimately,
25. What are the merits of outsourcing the performance of certain value chain activities as opposed to performing them in-house? Under what circumstances does outsourcing make good strategic sense?
When should you outsource? If you are losing focus on your core business because you are too busy handling operations or if you are facing a time, money or human resource crisis, outsourcing is a solution[2]. Outsourcing can also allow you to be the first one in your market to gain that important edge to put you over the top. However, the main reason for outsourcing is that a mission-critical project needs to be finished, but there is a lack of specialized personnel to finish the project. Outsourcing is not done only to save money, but because the specialization is necessary for certain products.
During the 1980s and 90s, outsourcing organizational activities became the standard for many organizations (Kahai et al., 2011). Outsourcing, as a part of an organization’s overall strategic plan, has been effective in helping achieve organizational goals and objectives (Kahai et al., 2011). Currently, many organizations incorporate outsourcing into the strategic plan, and this trend will probably increase in the future (Heikkila & Heikkila, 2010). Although outsourcing will not solve all of the problems inherent in attempting to achieve competitive advantages and organizational cost-reductions in an organization, the practice is increasingly part of an organization’s overall comprehensive strategy in the business world (Andreff, 2009). While
This paper captures the most prominent services and issues associated with today's outsourcing environment. Outsourcing is the modern business term for having other companies accomplish basic business processes rather than doing them inhouse. While outsourcing has always been an important business option, modern technical capabilities are fast making outsourcing a critical requirement in competitive, cost conscious industries. However, our recent experience with terrorist challenges indicates that a second look is needed to ensure that outsourcing risks are still acceptable.
Outsourcing, and in particular offshore outsourcing, is absolutely necessary and helps our country 's economy. Outsourcing helps a company focus on those things it does best and hence increase its "top line" revenues while reducing costs. Outsourcing has provided organic growth to the United States corporations and enabled them to compete more effectively in global markets. This paper seeks to explore what outsourcing is, what the difference between outsourcing and offshoring is, what effects it has on individuals, firms, countries and the world as a whole, the controversy surrounding outsourcing, trends of outsourcing and the necessity for it.
Silvius (2013) has stated that the most significant effect of IT outsourcing is that it has reduced the cost of manufacturing. Moreover it has been declared that IT outsourcing can reduce the manufacturing cost and time from 60% to 90%. Information systems are also polished by the IT outsourcing. It also helps to promote the business processes and financial exchanges among different companies. To draw best out of the IT outsourcing, it is mandate that the IT must be well aligned with the business plans and strategies of the companies.
First advantage of outsourcing is that the organization is in the position to ensure that it is able to complete its activities in a swift and expert manner. Second advantage of outsourcing is that it helps organization to concentrate on core process instead of supporting processes carried out by it. Third advantage of outsourcing is that the organization will be in the position to ensure that it is engaged in activities of risk sharing over a period of time (Carroll, 2007). First disadvantage of outsourcing is that the organization will have risk of exposing confidential data. Second disadvantage of outsourcing is that it can cause some problem to
Outsourcing is an allocation of specific business processes to a specialist external service provider. Most of the times an organization cannot handle all aspects of a business process internally. Additionally some processes are temporary and the organization does not intend to hire in-house professionals to perform the tasks. Once the task is outsourced to the service provider, he will take the responsibility of carrying out the tasks and maintaining the organization’s assets. However prior to outsourcing any component of your business to a third-party vendor, it is essential to understand the advantages and disadvantages of outsourcing. Although outsourcing presents a variety of benefits to
Outsourcing can be expensive and have multiple risks; however, in this paper I will identify the possible risks to an organization in each of the following outsourcing situations:
The challenges for outsourcing are many as there are two different companies working together. The risk of something going wrong is based on whether the communication between the two is good. Communication is the most important part of the cooperation between the two companies.
The take Information Technology Services outsourcing first, innovations in technology are rapidly alluring the businesses and economic models to evolve. Organisations need to adapt to those enhancements and changes to thrive in a competitive market. Some of these technologies include IT infrastructure, network, application development, storage, cloud services, etc. In-house employees may perform such functions but probably not as efficiently or as
Outsourcing refers to hiring an outside, independent firm to perform a business function that internal employees might otherwise perform. Many organizations outsource jobs to specialized service companies, which frequently operate abroad. The outsourcing trend stands to continue; the latest wave of outsourcing impacts the information technology field. IT outsourcing includes data center operations, desktop and help desk support, software development, e-commerce outsourcing, software applications services, network operations and disaster recovery.2
Outsourcing: A company can save the cost and create a value if any of the value chain activity can be performed outside the company otherwise performed in-house. Companies withdraw from a few noncore activities and rely upon the outside company to supply a part of the product or services that is not a company 's core competency. Outsourcing can increase competitiveness any time when the same activity performed better at a lower cost, these activities are not a core capabilities of the company, it reduces time and speeds up the process, allow organizational flexibility, and allows concentration on the core business competencies that the company does best. Normally, before making any strategic move, a cost-benefit analysis is performed to decide, if off-shore, on-shore or service contract to another firm is necessary and the best move from a strategy perspective. Off-shore outsourcing adds a complex foreign supplier, global trade into the equation and requires consideration of a global strategy as part of the generic strategy.
Outsourcing should only be implemented when a company’s core competitive advantages are not affected and then when