Outsourcing Gyan

What is Outsourcing??

Outsourcing is often defined as the delegation of non-core operations or jobs from internal production within a business to an external entity that specializes in that operation. Outsourcing can be considered a strategic management tool that helps companies concentrate on their core competance and delegate other peripheral activities to an external agency that specializes in that task.As a concept outsourcing is not new and in a way it has been around since the time of hunters and gatherers.Division of labour which entails delegating responsibilities to people who are specialists in what they do, can be seen as a very primitive form of outsourcing.

Outsourcing the way we it understand today started two decades back but was not popular due to a lot of external and internal parameters.These parameters include closed economies, internal resistance to the idea and the apprehension that the vendor might not be able to meet the set expectations.

But since the 1990’s there has been a radical shift in this thought process.Outsourcing as a business strategy has produced tremendous gains to organizations that have been able to streamline the process over years of experience.

Why do companies outsource??

One of the most often cited reasons for outsourcing has been the cost reduction factor.Simply put, what this means is that an organization delegates a job to a vendor who can perform the same job at a much lower cost.The comparitive cost advantage that a vendor offers forms the basis for outsourcing.

Apart from the cost reduction factor there are other reasons as to why a company would want to outsource.These include:

• Avoid capital expenditure

• Improve efficiency

• Offload non-core functions

• Get access to specialized skills

• Save on manpower and training costs

• Reduce operating costs

• Improve speed and service

• Spread risks

• Be reliable and innovative

• Provide value-added services

• Increase customer satisfaction

Outsourcing in India

The evolution of the BPO industry can be traced back to the following significant events in the macroeconomic policy:

• .The liberalization of the Telecom sector in 1994 which encouraged private participation.
• The New Telecom Policy of 1999 introduced IP telephony and ended state monopoly on international calling facilities
• This brought about a drastic reduction in international calling rates and served as vanguard for the emergence of the industry.
• The services which were outsourced initially include medical transcription, data processing, billing and customer support.
• Some of the earliest players include American Express, GE Capital and British Airways.

India is considered one of the hottest destinations for outsourcing given the numerous advantages it has to offer.Some of them include:

• Head start in the global IT revolution
• India’s history and the expertise it has been able to develop over the years
• Availability of manpower
• Moving up the value chain in terms of greater breadth of services being offered
• Stable Macroeconomic conditions
• Number of companies offering ITES services.
• A friendly tax structure
• Fast Turn around times
• Offering 24*7 services services based on geographical location
• Proactive policy environment.