Outsourcing of Services

A Business refers to a set of organised activities for production and exchange of goods and services, with an objective to earn profits.

It includes several services to complete the process for managing business enterprise.

There are certain important services that are rendered outside the business to enable the enterprise perform its primary functions smoothly.

These services include financial services , advertising services , customer support services , etc.

Services done through specialised agencies outside the business enterprise are known as outsourcing of services .

This practice is called Business Process Outsourcing (BPO ) .

Outsourcing means getting an external source service rather than an internal source of the enterprise.

Hence , instead of setting up it’s own department business enterprise outsource it from other external specialised agencies.

A business enterprise prefers to outsource those services that are specialised in nature and performed on a regular basis. These services include accounting data processing, content development , customer care , customer contact , legal services , repair work , advertising services, fittings , employment of employees , training of employees, payroll accounting,etc.

The outside company,  the service provider or a third-party provider, arranges for its own system of labour and technical activities  to perform the tasks or services by the hired  company .

In today’s competitive environment ,the main focus is to concentrate on core specialization and core – competency areas and outsource the rest activities. 

The main intention of outsourcing service is that the business enterprise can concentrate on its core areas of competence and leave the additional work to be outsourced . Outsourcing of services is preferred for better quality and economy .As a result a business enterprise can focus its core task through the front office and leave the rest work meant for the outsourcing.

Business enterprises  often outsource as a way to lower costs, improve efficiencies and gain speed . The benefit underlying this  service is that because the third-party provider focuses on that particular task, it is able to do it better, faster and cheaper than the hiring company could.

Given such benefits, companies often decide to outsource supporting functions within their businesses so they can focus their resources more specifically on their core competencies, thereby helping them gain competitive advantages in the market. ___________________________________________

Concept of BPO and KPO 

Business Process Outsourcing (BPO ) :- 

BPO involves contacting external agencies for performing specific business functions . 

Services like call centre jobs meant for customers , contact and payroll preparation , accounting services , courier services , advertising services , customer related services , etc. are some BPO jobs .

BPO job is often divided into two categories 

• Bank office outsourcing which includes internal business functions such as billing , purchasing etc. 

• Front office Outsourcing which includes customer related services such as marketing , technical support etc.

five BPO exporters according to NASSCOM are Genpact , TCS , WNS Global Services , Wipro and Aegis LTD.

 Broadly there are a few different types of BPO  based on the distance between the two members of the relationship. These types are:

On – shoring :- . Relocating work or services to lower-cost locations in the company’s own country.

Off-shoring:- Relocating work or services to third-party providers overseas.

Near-shoring:- . Relocating work or services to people in nearby, often bordering regions and countries

BPO helps the company to focus on its core competencies without being burdened with routine activities. It helps in increasing the speed of various business processes  and allows business enterprises to retain their entrepreneurial speed and agility .

Knowledge Process Outsourcing ( KPO ) :-

KPO stands for knowledge process outsourcing. Outsourcing of knowledge results in the emergence of a new business activity known as KPO .

 Knowledge process is a high value added process that depends on the skills , knowledge and experience of the people carrying out various activities .

KPO calls for application of highly specialised knowledge .

India still maintains the competitive advantage for providing the most cost – effective and high quantity manpower . KPO derives its strength from the depth of knowledge , experience and judgement factor.

The scope of KPO is vast and it covers information technology (IT) enabled services ,legal processes , intellectual property patent related services , engineering services , web development application , CAD / CAM applications , business research analytics ,legal research , clinical research , publishing market research, etc .

Advantages of Outsourcing :-

• Getting good quality services :-  A business enterprise cannot be expected to have specialization in all activities . As a result , the need for outsourcing services is generally necessary.  Expert advice from outside agencies facilitates success of the business.

• Concentrating on core activities :-  Outsourcing ensures overall better performance of the business enterprise as it can concentrate on core activities of its strength and competence . This has a positive effect on the quantity of service.

• Avoiding Labour Trouble :- Outsourcing reduces the employee related problems as the agencies include their own staff which are not included as enterprise staff . 

• Cost effective Services :- Sometimes , it is economical to outsource some services instead of maintaining a separate department for it which may cost more than expected budget and leads to increase in cost production.

• Avoiding Fixed Investment :- Instead of investing for a separate department a business enterprise gets service from outsourcing . This results in investment savings which can be used for profiting business .

Hence , outsourcing has been viewed as a way to lower costs and gain efficiencies, it is increasingly becoming a strategic tool for companies.


Disadvantages of Outsourcing .

There are certain Disadvantages that come along with outsourcing .

Disadvantages such as  ,

• Outsourcing Supplier No Longer Able To Supply the service to the Business enterprise which can cause emergency problems .

•. Confidentiality Risk that a business enterprise takes when it selects the option of Outsourcing .

•  By giving away a function of business to an outsource the  enterprise gains the advantage of having an expert for the service but  loses control over that particular function .

• The service may Be more costly than actually expected causing an increase in cost of production.

• Maintaining and securing a trusted relationship is essential in outsourcing efforts and is more complex than establishing service levels and relationships.

Despite disadvantages , outsourcing is opted by my many business enterprises .

The  disadvantages or problems could be avoided by having a trusteeship outsourcing contract and by  examining service level agreements, timeframes ,  rewards, and regular review strategies .