Outsourcing could be stated as a procedure in which there is usually subcontracting to a third party company. The plan is basically adopted to reduce the cost and make the best out of the available resources, technology and capital.
The ultimate aim of outsourcing is to increase employment in a developing country and improving the living standards of the working class. But the IT operations in the past few years have suffered due to the whole idea of outsourcing. There have even been instances like McDonald’s drive through windows speakers and order boxes being manned by individuals that are not even in that building or for that matter in the same country. Many of the infomercials have tele calls to be attended to and these are handled by outsourcing to India. Strong grounding in the English language makes it cost effective. However, one cannot deny the fact that outsourcing is important and more of a helpful tool.
Outsourcing Process:
1. Strategic level decision followed by approval from the board is required for carrying out outsourcing techniques. Decisions are processed with a make-buy analysis.
2. Referred to as RFP it takes place through bidding. The innovative ideas and the creativity of the suppliers may be used to judge their proposals.
3. Response of the suppliers and the requirements of the clients are analyzed and down selection is carried out which involves selection of suppliers until a few remain.
4. Documentation and the prices are finalized and agreement is drawn between the supplier and the client.
5. A legal document is drawn on how the client and the supplier will work. Commencement date and the date of signing the document are the important criteria to be noted.
6. Transition will be effective for a period of 4 months after the service has commenced. Services are handled after this process. ‘Centralization’ and ‘Standardization’ is emphasized to implement SLA (Service Legal Agreement) and to reduce the TCO (Total Cost Ownership).
7. Agreement is executed and goes on for the period of contract.
8. When the contract is about to end, termination can take back the services or transfer them to another supplier.
What are the reasons for outsourcing?
o Improving quality
o Expertise in operation
o Benefit from tax
o Capital Venture
o Reduction in marketing Time
o Commodification
o Management of capacity
o Improvement of quality
o Catalyst for change
o Talent access
o Knowledge and contract
o Restructuring and saving cost
o Focusing on the core business
Activity Behind outsourcing
Firms have responsibility to handle new requirements of the market and utilize resources efficiently. R & D work might be outsourced to research organization at contract.
This benefits the end customer, company choosing the outsourcing to the investors and everyone in the outsourcing location. The only problem to be stated is the telephone customer service where there is the barrier for the language. The foreigner never finds the product they are supporting and hence the market suffers. However, for assuring quality, order entry, technical support and a variety of other areas outsourcing is extremely helpful. It assures employment in a developing country and should be taken in a positive stride.