Outsourcing is the process of delegating a company’s business process to third parties. It maximizes the benefits of low cost labor and improved quality of product and service innovation. It is a strategy by which an organization contracts out major functions to specialized and efficient service providers who ultimately become valued business partners. In some cases, Outsourcing involves the transfer of employees from the company to the outsourcing company.
Why do companies outsource?
There are many reasons why a company may choose to outsource certain business functions.
Given below, as reflected by companies, are the top ten reasons to outsource:
1. Lower operational and labor costs are the primary reasons.
2. Companies choose to outsource to focus on the core task of their business.
3. Outsourcing and offshoring enable companies having access to world class capabilities.
4. Freeing up internal resources in to effective use. Thus,this is one of the primary benefits realized when companies outsource or offshore.
5. Many world class enterprises outsource to gain access to resources not available .
6. To save costs and provide a buffer capital fund to companies. And leveraged the best profits of the company.
7. Companies can distance itself from things that are difficult to manage.
8. Outsourcing helps companies lessen risk.
9. Outsourcing also enables companies to realize the benefits of re-engineering.
10. Some companies also outsource to help them expand and gain access to new market areas.
As a conclusion, Companies undertake outsourcing and offshoring for a variety of reasons depending upon their vision and purpose of the exercise. While this may vary from company to company, the fruits of labor are visible among some of the leading enterprises world wide, where in outsourcing and offshoring have become a core component of day to day business strategies.
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