Outsourcing: Strategic Management and Company

2763 Words Apr 25th, 2013 12 Pages
Outsourcing

Outsourcing is a business strategy that has been around since the eighties and has grown in popularity year after year since. There should be advantages to outsourcing for this trend to occur. There are however certain types of companies that would disagree with this method. Outsourcing has become one of the most controversial issues in business today. This report will explore different approaches on this matter to try and understand whether outsourcing is always the best option or not. It will study the advantages and disadvantages of outsourcing and insourcing, why some companies prefer one as opposed to the other and finally the factors that affect their decision, such as environment and cost.
The definition of the term
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Finally, Knowledge process outsourcing also known as KPO, includes advanced research, analytical and technical skills. Whilst in BPO the process is led by the client, in KPO consultants are in managerial control. This type of outsourcing is the oldest and is usually used in short term and exterior ventures. Examples of KPO include: pharmaceutical research and development, intellectual property research, content writing, and database development services.
As mentioned previously one of the main advantages and reasons for outsourcing is cost. Sometimes outsourcing certain business processes to other countries can offer the same level of quality at a much lower cost, this is known as offshoring. A company may do this as it can be much more cost effective or as a strategic move, for instance if they are looking at entering a new market or trying to overcome protocols that may stop certain tasks taking place in their own country. According to Sourcing Mag, India is one of the most common countries that England offshores to when it comes to BPO, especially in software, as English is widely spoken and there are many highly trained software engineers. India has become the world’s back office provider, from call centres and claims processing to human resources, accounting and even legal operations. Almost 40 per cent of American Express’s back office processing is outsourced to India; Citibank has more than 2000 direct
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