Outsourcing is actually a contractual agreement of internal business operations to a third party business, commonly known as third party agreement. Instead of increasing man-power strength internally in a business, the operations are usually endorsed to out-sider organization as per the requirement of current economic situation. Outsourcing actually came to know in United State at the very end of 20th century. In outsourcing, the assets or employees can be transferred or sometimes all major operations of internal business are forwarded to other organization.
It does not mean that outsourcing is processed within a country rather can be done outside the country, also referred as offshore business. It can say that a domestic-business activity is being performed to another foreign country. Contrary to the outsourcing, insourcing term is used, which is completed by vertical integration. Sometimes a business does not want to boost up man’s power and simply transfers the business process to other country.
Minimum requirement for establishing outsourcing, there must be the two organizations, which have agreed on all terms & condition exchanging goods & services. The main purpose of outsourcing is just to meet the desired goal, where a business has shortage of skilled and professional employees.
Outsourcing is the best management for controlling the budget of a business, as in outsourcing, a company has to pay for the services as per requirement. It also cut down the budget of recruiting new experts’ staff and the expense, which is to be incurred as an administrative cost. Following five processes are commonly outsourced:
1: Business Continuity Process Outsourcing (BPO)
It has already been discussed above that due to work load and lack of staff, business usually transfers its burden to another organization by paying the agreed amount. In this outsourcing, a business transfers its operations, maintenance, admin, customer services work-load for smooth continuity of business. Sometimes, business uses outsourcing for off-site data backup.
2: Information Technology Outsourcing (ITO)
This type of outsourcing consists of information technology related activities. Companies are mostly involved in a tough routine that they cannot find time for these activities. That’s why they refer the same to other companies for resolving all IT related issues such as; software developing, hardware maintenance, installation of operating systems and all business related applications, which can be beneficial for the business. It also cut down the budget for hire expertise for the same.
3: Knowledge Process Outsourcing (KPO)
It is significant outsourcing that can resolve the knowledge based issues of the company. All these activities are transferred to a third party for acquiring better result of portfolio analysis, risk-averse investment, and credit rating with the help of experienced & talented staff of other organization.
4: Accounts Outsourcing
Every business is involved in accounting and financing techniques. Every registered business needs audit of all internal business transactions as per the requirement. So in spite of hiring the expertise for this particular task that is much more costly, they hire the services of special and well trained professional accountants for performing this task.
5: Human Resource Outsourcing (HRM)
Human resource outsourcing provides the basic services of human resource management. Every business has its own human resource department, but to fulfill the desired goal, it has to purchase the services of outsource human resource that helps in maintaining payroll compensation, TA/DA, employees performance, attendance management system, trainings and hiring of new employees. These outsource companies usually earn from the recruited employees as well as from the contracted company.
It is obvious that single company cannot concentrate on multi-tasks absolutely, if it hires the services of other companies, its result can be efficient and oriented in all aspects. A single company cannot hire all the expertise within its premises at a time, but it can purchase best services of professional companies on the basis of “services equal to remuneration” which build the business with outsourcing.