Advantages of outsourcing, and five services that can be outsourced

Outsourcing

Outsourcing means handing to an outside firm, under contract, work that a business would otherwise do for itself. Firms are moving away from the old habit of doing everything in-house: they now contract out manufacturing, research and development and many business processes, whether these depend on information technology or not. Two familiar forms are business process outsourcing (BPO) and knowledge process outsourcing (KPO).

Advantages of outsourcing

1. Attention on the core business. A firm can specialise in what it does best and pass its non-core activities to outside agencies. A cement maker, for instance, can concentrate on its kilns and markets instead of running its own payroll office.
2. Access to specialists' best skills. A network of contracted firms lets each partner contribute what it does best, so the principal firm draws on the strongest capabilities of all of them.
3. Efficiency. Outsourcing grows out of a firm's own search for improvement and efficiency, under pressure from competition and demanding customers. Cooperative ties with outside suppliers and associates give a firm both efficiency and flexibility.
4. Capacity that moves with need. Contractors can be brought in or released as the firm's requirements change.
5. No need to build every facility. A company need not set up its own call centres or help lines for customers; it can have them run by an outside firm.
6. A partner close to the market. A smaller partner nearer the customer can sense coming changes and respond at the local level, relieving the principal firm of that task.
7. Gains for the country. India has done well from global outsourcing work, in jobs, in building capability and in its contribution to exports and national income.

Five services that can be outsourced gainfully

1. Customer call centres and help lines, which take queries and complaints round the clock.
2. Advertising, handed to outside agencies.
3. Share-transfer management, which some companies already give to outside agencies.
4. Professional services delivered online, such as legal, accounting and medical advice, which the internet allows firms to obtain as information-technology-enabled services.
5. Transport and distribution, carried out by partner firms on contract.

Even core work such as research and development, manufacturing and marketing is now outsourced by some firms. A Gurugram online grocery start-up, for example, might give its customer help line to a BPO in Mohali, its accounts to a chartered accountancy firm and its last-mile deliveries to a logistics company, keeping only buying and pricing in its own hands.

Conclusion

Outsourcing lets a firm stay lean and concentrate on its core while specialists handle the rest. Its benefits depend on the partners: a firm that relies on contractors needs ones it can trust, and must still coordinate what they do.