Outsourcing: Business in the 21st Century

Published: 05th October 2006
Views: N/A

The word outsourcing is often heard in the world of business today. It is something which has affected the business of almost every nature and every nation. Outsourcing is occurring in almost every country of this world to some extent. There are some leader countries in this field of outsourcing such as India and China. Before moving towards the topic of this article let us first understand what outsourcing is.

What is Outsourcing?
When discussed in simple words outsourcing is simply a formal agreement with a third party to perform a service for an organization. A more comprehensive definition for outsourcing would be that outsourcing is the concept of taking internal company functions and paying an outside firm to handle them. It is basically done for the following major reasons:

-To save money in terms of lowering costs

-To improve quality

-To free company resources for other activities such as focusing more on competencies

The concept of outsourcing began with the data-processing industry and today it has spread to vase areas which comprise of tele-messaging and call centers. It would not all be wrong to say that outsourcing is the surge of the next generations. Another name used for outsourcing is off shoring which has the same meaning as outsourcing.

Technically speaking, outsourcing is not merely the contract with a third party to perform a service for an organization, but it also involves transferring a significant amount of management control and decision-making to the external supplier. The process of outsourcing is very much formal like other business processes and it always includes a considerable degree of two-way information exchange, coordination, and trust.

The concept of outsourcing gained popularity in the mid 1990s since then the trend of outsourcing has increased to a great extent. The reason for this increase in the popularity of the concept of outsourcing was the rapid growth in the number of high-tech companies in the early 1990s that were often not vast or large enough to incorporate and run large customer service departments of their own.

Different Techniques of Outsourcing
The concept of outsourcing was adopted by different organizations in different methods such as in some cases the companies who desired to outsource their customer service:

-Hired technical writers in order to write simplified usage instructions of their products

-Index the key points of information

-Contracted with temporary employment agencies to search for, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls

The most wide spread method of outsourcing being adopted throughout the world is of call centers. The people employed at the call centers answered the query calls of the customers, where the information needed to assist the calling customer was indexed in a computer system. In most cases the agents were not liable to tell the customers that they were not directly associated with the original manufacturer.

Outsourcing: Business in the 21st Century
As it has been discussed in the introductory paragraph of this article that outsourcing has become a buzz since the last few years. Almost every country and almost every organization is outsourcing a part of its tasks or some tasks. The reason that has been found for the increase in the trend of outsourcing for businesses is it increases profit and lower costs, and business focuses most on these aspects. For instance if we consider the example of IBM , which in the year 2003, decided to outsource the jobs of almost 5000 programmers to India and China. Similarly, Microsoft, Dell, American Express, and virtually every major multinational from Accenture to Yahoo has already outsourced work or is taking decisions to do so. From the studies of the outsourcing of these companies it has been found that the savings due to outsourcing are spectacular as companies can reduce around 20% to 70% of their labor costs by outsourcing jobs to low-wage nations considering that the work is of same quality.

The different Business tasks that are being outsourced in the 21st century

The concept of outsourcing is applied to a vast area of business processes or tasks. Every organization outsources some particular tasks to a vendor. The task that was outsourced mostly when outsourcing began, was customer support, later with the advancement in technology and knowledge this limited area included IT, data analysis, Medicare, engineering and a few more. The following is an explanation of how these different tasks are outsourced:

Outsourcing Data Analysis

Every organization that is operating possesses a large amount of data, the useful information is mingled within this data, and retrieving it is a full time consuming task. This task is known as Data analysis. It is a complex task of extracting useful information from a pile of data. The process of data analysis occurs in operations like banking operations, retail or pharmaceutical research. The nature of analysis differs with the difference in data, each kind of data requires a different method of analysis. Some kind of data requires to be collected and calculated as a whole to present a final conclusion whereas some data requires to be studied individually. This comprehensive task when outsourced to a third party, reduces the extra work load and cost of the organization.

Outsourcing IT
Outsourcing IT is defined as using outside vendors to create, maintain, or reengineer IT architectures and systems. The methods of outsourcing that have been discussed earlier in this article are those which have now become old, one of the latest one is outsourcing IT. The process of outsourcing IT involves involves the effective management and operation of information technology assets of corporations from a remote location. To explain this concept, consider the example of the management of a computer network of a large corporation which includes outage monitoring, alarms monitoring, remote monitoring of data centers, etc. The nature of these operations is complex and requires a real-time support when needed. Hence it can be assumed that such processes cannot be easily outsourced to places where there is a big difference in the time zones. Such tasks are outsourced to comparable time zone locations, which are competitive.

Outsourcing Medicare is a promising but debatable area. Outsourcing Medicare can include the following:

-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.

-Using the service of radiologists at a remote but competitive country to interpret scan images such as CT or MRI

An example of Medicare outsourcing can be taken is that of United Kingdoms pronouncement to send blood and urine samples from National Health Service (NHS) patients to India for pathology tests to reduce cost. This outsourcing venture operates in the way that the pathology test whose results are not required urgently as not within 48 hours, are conducted at the clinical lab setup at Mumbai, India. The blood and urine samples are flown to Mumbai. The 24-hour lab conducts the test and the results are uploaded into the special network linked to the NHS. The NHS hospitals in the UK get the reports in 24 hours. This method has been effective in reducing costs. Another area of outsourcing related to the field of biology is bioinformatics and biotechnology.

Outsourcing research process
Outsourcing research processes is a small sector of outsourcing. Research processes are time consuming tasks which require a lot of attention and they are outsourced by breaking up into parts or in full. There are other names for research process outsourcing (RPO) is also known as Knowledge Process Outsourcing (KPO), as it requires extensive and high level knowledge to be applied. A pioneer of RPO is the company General Electric.

Outsourcing Engineering Design
Another area of outsourcing is designing, the designing of buildings to small thinks like watches and toys can be outsourced. The following are the different areas of engineering which can be outsourced.

-Structural design such as the designing of buildings, factories, bridges
-Hardware design such as designing of consumer electronics, home appliances, toys, industrial instruments

-Product design such as of medical devices, white goods, automobiles, etc.
-Architectural design, Mechanical engineering as gas turbines, aircraft engines, automobile parts, etc (Wikipedia: Outsourcing)


Alex Martin works as a staff writer for Project
Outsourcing. We offer Project
Service, Web
and jobs for webmasters and freelancers. The writer also works
for TermPaperscorner,Inc. which offers
custom term paper writing service.

Video Source: Youtube

Report this article Ask About This Article

More to Explore