Outsourcing

           Outsourcing is defined as the management and/or day-to-day execution of an entire business function by a third party service provider. Outsourcing and/or out-tasking involve transferring a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, co-ordination, and trust.

          Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Many companies look to employ expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include Information Technology, Human Resources, Facilities and Real Estate Management and Accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is characterized by expertise not inherent to the core of the client organization.

          The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs, this trend is often referred to as offshoring of customer service.

           A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.

           The term "outsourcing" became more well known largely because of a growth in the number of high-tech companies in the early 1990s that were often not large enough to be able to easily maintain large customer service departments of their own. In some cases these companies hired technical writers to simplify the usage instructions of their products, index the key points of information and contracted with temporary employment agencies to find, train and hire generally low-skilled workers to answer their telephone technical support and customer service calls. These agents generally worked in call centers where the information needed to assist the calling customer was indexed in a computer system. The agents were often not able to tell the customer they did not actually directly work for the original manufacturer. In some cases, the agents are not allowed to even give out their real name.

Shared services - an alternative

           Organizations now often establish Shared services within their firm as an alternative to outsourcing. Shared Services are the convergence and streamlining of an organization's functions to ensure that they deliver the organization the services required of them as effectively and efficiently as possible. Rather than having a department (e.g. HR) devolved over a number of offices, a shared service is the centralizing and convergence of these. This often involves the centralizing of back office functions such as HR and Finance but can also be applied to the middle or front offices. A key advantage of this convergence is that it enables the appreciation of economies of scale within the function and can enable multi function working (e.g. linking HR and Finance together, where there is the potential to create synergies). A large scale cultural and process transformation is often a key component of a move to Shared Services. This transformation often results in a better quality of work life for employees.

Outsourcing, Offshoring, and Offshore Outsourcing

           Note that “outsourcing,” “offshore outsourcing,” and “offshoring” are used interchangeably in public discourse despite important technical differences. To be consistent, “outsourcing,” in corporate context, represents an organizational practice that involves the transfer of an organizational function to a third party. When this third party is located in another country the term “offshore outsourcing” makes more sense. “Offshoring,” in contrast, represents the transfer of an organizational function to another country, regardless of whether the work stays in the corporation or not. In short, “outsourcing” means sharing organizational control with another organization, or a process of establishing network relations within an organizational field. "Offshoring,” on the other hand, represents a relocation of an organizational function to a foreign country, not necessarily a transformation of internal organizational control.

Types of outsourced work

           Note Some outsourcing companies use a competition/contest-style approach to get their advanced work done AND hunt for international talents for potential employment.

Data analysis

           Note Every organization generates huge chunks of data. Hidden in them is information. Data analysis is the crucial process to extract information out of the otherwise random pile of data. The analysis results in gaining intelligence, such as trends, out of the data. This is vital in any processes let it be banking operations, retail or pharmaceutical research. Varying amounts of data in quantity and quality are generated depends upon the process. Similarly the analysis requirements too vary depends upon the process. For example the huge chunk of data generated by drug trials needs to be analyzed to conclude the result. Similarly data from a diversified field needs to be pulled together and analyzed to forecast the trend in the stock market.

           Note There are numerous ways the outsourcing is exploited for business advantages. For example the data generated out of the New York stock exchange ( NYSE ) during the days transaction is send the to analysis centers at Bangalore, India, at the opposite end of the time zone. The Data Analysts perform the analysis required for the trading company executives and send it back to New York. The day for the New York executive starts with the needed picture processed out of the data.

Research process

           Note This is treated as the niche sector in the outsourcing. The research processes are usually outsourced in full or in parts. Let it be the research in nanotechnology or research in genetics, the processes is viable for outsourcing. Generally larger research projects are cut into various sub projects or tasks. The outsourcing is then carried out based on the viability and competitiveness of the outsourcing destinations. Thus exploiting the competitiveness available at various parts of the world into a single large project. The research process outsourcing (RPO) is also known as Knowledge Process Outsourcing (KPO) as it calls for the application of specialized knowledge of a high level. The KPO typically involves a component of Analysis Proves Outsourcing (APO) and Research Process Outsourcing (RPO). General Electric (GE) is one of the pioneers in RPO

IT operations

           Note This is one of the newcomers in the outsourcing arena. The task basically involves the management of IT assets of corporations from a remote location. For example the management of a computer network of a large corporation includes outage monitoring, alarms monitoring, remote monitoring of data centers etc. The nature of these operations calls for a real-time support when the need arises. That means such tasks are not easily outsourced to the places in far time zones. Instead it's outsourced to comparable time zone locations, which are competitive. This need for the geographical proximity earned it a specific name Nearsourcing.

Engineering design

           Note Any thing from design of huge refineries to wristwatch design can be outsourced. This is probably the next matured outsourcing process after the software development outsourcing. There are two types of business houses in this arena. The first is the captive design houses, that is design houses setup for the exclusive work of one client. There are different cases such as the parent company themselves setup the design center at a different (economically competitive) country or partner with another company at the outsourcing location or completely depend on the partners resources (with appropriate contractual obligations). Popularly such facilities are called Offshore Development Center (ODC). The second types of design firms are open in nature. That's they win contracts for design from customers in an open market, just like any other services for sale. Typical specialties of engineering design outsourcing includes Structural design (buildings, factories, bridges etc), Hardware design (consumer electronics, home appliances, toys, industrial instruments etc ), Product design ( medical devices, white goods, automobiles etc ), Architectural design, Mechanical engineering ( Gas turbines, aircraft engines, automobile parts etc)

Legal support services

           Note Works outsourced in this field range from those in the techno-legal (such as drafting patent claims) to the keying in of legal transcripts (from audio) to structured legal documents. Patent application preparation is a painstakingly labor intensive process (searching patents all over the world) that demands special knowledge in the subject under patenting and the legal requirements. Nevertheless this is a multibillion dollar business and hence its place in the outsourcing arena.

Art, animation, editorial and DTP work

           NoteThis is where the creative business finds its overseas partners at a competitive country. Anything from apparel design to cartoon animation in the creative business is outsourced. For example, creative houses are setup at competitive locations to get the animation of movies done. Another example is the DTP work. The text transcript of a book can be sent to another country, where designing takes place (typeset, artwork, illustrations, cover design etc). This can then be directly sent to press.

Software development

           This is likely the most talked about subject in the outsourcing field. Due to the nature of programming, the outsourcing of software development has evolved more rapidly than other areas of job outsourcing

 Software development e.g. TopCoder
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