Outsourcing: The New Waves in the Sea of Business
The trend of outsourcing began in the 1980s in the US in various aspects of business organization as a way to cut costs. One of the assumptions was that outside service providers were in a good position to hire workers with low wages and to deliver economics of certain tasks. That way outsourcing got a boost in the 1990s with the concept of ‘core competencies’ as the managers had to focus their time and effort on developing the core competencies.
Outsourcing has been used to reduce bureaucracy and to encourage a more responsive and cost-sensitive culture by introducing external market forces into the organization. It has also been pursued for several operational reasons such as greater efficiency or better service performances and also for cutting costs and used to obtain specialized expertise that is not available in-house.
Outsourcing takes place when an organization transfers the ownership of their employees to a supplier. In outsourcing its human resource, the organization does not instruct the client on how to perform its tasks but focuses on communicating the results the organization requires.
Factors Contributing to Outsourcing Process
The following factors have increased the importance of outsourcing after liberalization. They are:
- The customer now prefers better quality than price. The activities, which cannot be done effectively in-house are outsourced so as to maintain high quality of the product.
- Modern flexible manufacturing systems like computer-aided design, computer-aided manufacturing and robotics have made outsourcing attractive.
- Outsourcing leads to a decrease in the overhead cost.
- The corporate structure becomes flat.
- Managers will be left with adequate time to spend on marketing aspect of the business, which will lead to revenue maximization.
- Brand management will be the core activity in future, which will earn profit for the company. The company can invest more in generating brand equity rather than investing in physical assets.
- It offers flexibility of choice to the employers as well as employees to select the employee and employer according to their own need and convenience.
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