Outsourcing is the business practice of contracting a particular function of your company to an outside person or business. The tasks being outsourced are typically considered non-core to the business.
What are the types of outsourcing?
While companies have long outsourced narrow functions like payroll and data entry, some now outsource entire operations. The most common forms are
Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO). BPO includes services like call centers, human resources (HRO), finance and accounting, and claims processing.
In 2014, the global market for outsourced services reached its highest point at $104.6 billion. Of that, the global ITO industry revenue was $76.1 billion, while the BPO industry revenue was $28.5 billion.
Why do businesses outsource?
Companies outsource to handle business processes more efficiently and cost-effectively by leveraging providers with specialized tools and personnel. Some nimble companies, like software start-ups, use a “multi-sourcing” model—using both internal staff and service providers—to speed up the time to launch a new project.
What makes outsourcing successful?
The process of outsourcing generally includes four stages: strategic thinking, evaluation and selection, contract development, and ongoing management of the relationship. The success of any outsourcing service depends on three key factors:
Executive-level support in the client’s organization.
Ample communication to any affected employees.
The client’s ability to effectively manage its service providers.
The challenges of outsourcing can be especially acute when the work is offshored to a different country, which can introduce language, cultural, and time zone differences.
