Global Outsourcing

Global outsourcing denotes to the way in which firms assign their business process functions to the external companies. This includes business activities such as, account processing, payroll, data conversion, logistic, IT services, writing and editing services, and many more. Outsourcing happens when a company buys products or services from an external vendor, in order to save the cost associated with that particular process. Today, outsourcing term is most commonly related to employee leasing, in which a specialized vendor recruit, train and pay to their client’s employee, as well take care of their health insurance coverage and other benefits.

Global outsourcing is the latest trend these days, as most of the small and medium companies are adopting an outsourcing framework. Companies that select to outsource do so for a number of reasons, all of which are related to cut costs, gain business profitability, increasing efficiency, and sometimes the benefit of operating in multiple countries.

There are various drivers for global outsourcing, as it can offer value in many ways to an organization’s lifecycle. There are many benefits of outsourcing the business process functions. Some of them are:

Cost Advantages: The most obvious benefits of outsourcing are cost saving. A company can easily get its work done at a lower cost. When a company outsource services such as, transaction processing, recruitment, call center or training administration to a low-cost country like India, China or Philippines, they are actually getting access to the best and quality services at a much lower cost. Companies do achieve cost saving of around 60% by outsourcing the work to the vendors based in countries with low-cost operations.

Improved Risk Management: Now-a-days, more and more companies opt for this trend, just to shed off their operational burden. Migrating process to the external vendors with an efficient organization structure helps in reducing the operational risk of the company. The outsourcing companies do have a well-organized work environment, to ensure proper segregation of duties, which eliminates the risk of errors and frauds.

Increased Efficiency: When a company allocates a task to their outsourcing partner, they share the workload of their employees. Outsourcing allows a company to develop their internal force and use them efficiently. Also, outsourcing vendors can do the job better with their knowledge and experience, which leads to an increase in productivity in the company’s business process.

Access to Skilled Expertise: One of the main reasons why a company may want to outsource their business process is when it requires skilled resource. The resources employed by outsourcing partners are skilled, well-educated and experienced in handling the business needs of companies.  This will allow them to deliver the best quality service to the companies that want to outsource.

Focus on Core Activities: Additional non-core functions may influence the quality of company’s main functions. Outsourcing gives the company enough time to focus on other important and major business processes of the company which can help their business to grow.

Time Zone Benefit: Apart from the cost advantage, the other much visible benefit of outsourcing is the time zone difference between the company country and the location of the vendor they are outsourcing to. Offshore outsourcing to a country like India, gives the advantage to run the business 24X7. This way, the company has increased working hours and they can get more work done thereby increasing the overall productivity.

Save on Infrastructure and Technology: Infrastructure and technology can be an extra burden for some companies. Outsourcing removes the need for investment in Infrastructure and technology, as they do take the responsibility of the entire business function and hence develop the process for the same. A company who is outsourcing their business does not require to invest in employee training, software purchase and other investments. All this adds up to good returns in the long run.

Faster and Better Services: The outsourcing partners do deliver the quality service faster, to maintain the relationship with the company. This results in increased customer satisfaction and thus develop a chain of the loyal repeated customer base.

These are just a few of the many benefits of global outsourcing. It has been adopted widely as it offers more cost and quality services to the companies. This is achieved through standardization, scalability, flexibility, and transparent pricing models.

However, everything has its merits and demerits. Outsourcing also has its demerits, such as risk of exposing confidential data, a lengthy bid process, hidden costs, and a loss of strategic alignment. But, all of these drawbacks can be addressed and reduced by companies who go about the outsourcing business model.

Despite the potential drawbacks, the vast majority of companies are happy and satisfied with global outsourcing process. The future of global outsourcing looks bright and promising, and opens up employment opportunities to a larger section of the people than ever before.