Understand the complex global outsourcing concepts with this easy-to-read yet comprehensive article.
The word outsourcing has been in existence since the 1980s. It gained popularity in the early 2000s when there was a rise in call centers or BPO in the IT sector.
Many businesses consider global outsourcing as cost savers to their organization. Outsourcing also provides better customer service and reduces training and hiring costs.
After the COVID pandemic, many companies are planning to cut down costs. Hence, they prefer to outsource their business processes, which is a cost-effective option compared to recruiting. When the process is over, they need not pay employees anymore.
Thus, there is a demand for global outsourcing companies nowadays.
Global/International Outsourcing
When the business process of one company is assigned to another company of a different region, state or country, it is called global outsourcing.
Depending on the location, the services fall into the onshore, offshore, or nearshore category. Many large and medium-sized organizations choose any of these three models for business.
Strategic Outsourcing
But what about the majority of small businesses? When a small business needs a service provider, they prefer strategic outsourcing companies.
It helps them outsource a part of their business operations when they do not have those resources. It also helps them to explore new markets and increase productivity.
What is IT outsourcing?
Many IT companies hire resources for technical support, application or database development. In other words, when you farm out the non-in-house services, you can term it as IT outsourcing.
Different types of IT outsourcing
Onshore
The outsourced company is in the same country but in a different state. The uniform time zone makes communications between them much easy. If there are no budget constraints, then it suits your needs.
Offshore
The outsourced company is in another continent of a different time zone. The model is cost-effective and provides quality services. It also gives access to technical experts who deliver the projects within a short turnaround.
Nearshore
The organization chooses a neighboring country for its farm-out needs. It provides the combined benefits of the offshore and onshore model.
There are also different types of outsourcing that you can choose for your business.
Categories of Outsourcing Services
As the name suggests, you can hire expert service for a specific process. It has three categories:
RPO or Recruitment Process Outsourcing
The complete recruitment process outsourced to the service provider in RPO. They offer virtual HR services for your organization.
Knowledge Process Outsourcing
It involves research and data analytics to improve product or services. KPOs used for engineering designs, tax returns, financial services, and CAD simulation.
LPO or Legal Process Outsourcing
It is a service that does legal document writing and drafting patent services and document reviews.
This was earlier used in the manufacturing sector, but at present it is used by many businesses. A BPO firm can handle marketing, sales, customer support services, graphic designing, payment processing, quality assurance. In short, they do the front-end and back-end office operations.
Small businesses can outsource to upgrade or fix their major equipment at a reduced cost. It also helps them save on raw materials and labor costs.
When the company does not have the resources to complete a specific part of a project, they outsource it.
All the above-specified outsourcing models have more pros and cons mentioned below:
Pros of Outsourcing
Time-saver
Outsourcing helps a company to save enough time so that they can focus on other business matters.
Better-quality service
What is the top reason for global outsourcing of IT services? Then this is the best possible answer to this question:
When you outsource, it helps you provide enhanced services at lesser prices. Training or hiring professional for the same process can cost more. It is the reason why many IT, HR, and Finance sectors outsource their functions to a service provider.
Operational cost savings
The outsourced company has enough knowledge and advanced tools to deliver optimal results. It helps the company to save a few thousand dollars needed to search and hire the specific talent to get the work done.
Mitigates risk
Some challenges need expert help, and when done by others, it can open up room for pricey slips. When the workload is more, a wrong hire can add up the risk. So, outsourcing serves as the best risk management solution.
Stay ahead in the competition
The ultimate goal of any business is to provide the best service and stay ahead of competitors. With outsourcing, there are cost savings, increased productivity, and successful explorations of new markets. It gives the leading edge to stay ahead in the market.
Experience global expertise
We can never be an all-rounder in business spheres, so you need to find outsourcing resources. They are experts, so choosing their global expertise is beneficial for your business.
Like proven benefits, they also have some cons, which are mentioned below:
Extra costs
New costs are incurred during different phases of the project. Hence, it is better to have discussions about these costs before starting the project.
Have to settle for low quality
Many companies are short of skills and resources to perform a specific set of operations. But still, they think that the services of outsourcing companies are of low quality.
The only way is to do research about the company before signing an SLA.
Lack of knowledge of task progressions
It tends to be a cause of concern for many companies before they outsource. A reliable service provider’s frequent updates help businesses to maintain control over the tasks.
Having the best service provider helps you outweigh the outsourcing drawbacks. It offers sheer benefits to experience without any risk encounter.
Why choose global outsourcing services for business?
Outsourcing has helped businesses provide quality customer services and to professionally address the ever-changing customer needs. This flexible business delivery model has solved many challenging business tasks to date.
A description of how the outsourcing companies work gives you an insight into their efficiency.
The service providers break down the project modules and assign them to the vendor. They find vendors who can offer these services at nominal prices. It helps them to get better and faster results.
They track the work done by these people. They collect the assigned work from the suppliers and assemble them to complete the entire module. After this, they hand over the end product to the client. When you choose the right service provider, they offer products and services as per industry standard.
What are the benefitted industries?
The following industries use global outsourcing to their advantage:
What not to outsource?
Experts suggest that the company should avoid outsourcing operations that define its business. Every other process is worth outsourcing. When you choose this model, it helps your resources to focus on other business activities.
Now let us take a look at some examples for a better understanding:
Can you guess which of the following is an example of global outsourcing?
All the above are examples of global outsourcing. The above-profiled information should have helped you to get a clear idea on the topic.
This model helps businesses to increase productivity, sales, and revenues. Choosing a professional outsourcing partner would help you to experience more benefits without risk. Which point impressed you the most? Make sure to comment below to let us know your definition of what is global outsourcing.
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