Definition: The practice of having certain job functions done outside a company instead of having an in-house department or employee handle them; functions can be outsourced to either a company or an individual. Outsourcing has become a major trend in human resources for large companies over the past two decades.
Why Do Companies Outsource?
Put simply; people outsource to lower costs and improve the bottom line. Outsourcing saves money on labour and operational costs which can deliver significant savings and an increase in gross profit. The time savings can be significant and free up resources that benefit your organisation and customers.
Why Are Jobs Being Outsourced?
Job outsourcing helps U.K. companies be more competitive in the global marketplace. It allows them to sell to foreign markets with overseas branches. That lowers prices on the goods they ship back.
What Are Some Examples Of Outsourcing?
The decision to outsource usually stems from a focus on lowering costs and improving the efficient allocation of resources within a company. Outsourcing allows a company to redirect its attention to its own competencies and hire outside resources to handle other non core tasks.
Why Is It Good To Outsource?
Outsourcing is a great option to make the work process easier to handle. Those working in a local company may choose to outsource work so that they can continue to focus on the core business processes. Small tasks can be easily passed on to outsourcing companies.
What Are The Benefits Of Outsourcing?
Wise outsourcing, can provide a number of long-term benefits:
- Control capital costs. (Cost-cutting may not be the only reason to outsource, but it's certainly a major factor).
- Increase efficiency.
- Reduce labor costs.
- Start new projects quickly.
- Focus on your core business.
- Level the playing field.
- Reduce risk.
Which Company's Outsource The Most?
Many large companies have been “Outsourcing” or ‘Off-shoring” for over 20 years. Below are 5 example household names with descriptions of what they “Outsource” or “Off-shore”
- Apple - Apple's relationship with Chinese manufacturing firm Foxconn is well known.
- Nike - Sportswear giant Nike outsources the production of all its footwear to various overseas manufacturing plants.
- British Telecom - many back office functions.
- Barclays Bank - technology, back office settlements and multiple back office functions.
- EASYjet - customer services and ticket queries are carried out in South Africa.
WHY DO SO MANY LARGE COMPANY’S OUTSOURCE ?
Very simple – it is hugely effective both in cost and the availability of skilled capable staff. They know if works well it done properly.
WHAT ARE THE RISKS OF OUTSOURCING ?
Six core Risks of Outsourcing
- Badly drawn up Service Level Agreement
- Poor Service Provider
- Under estimating costs
- Poor management oversight
- HR issues from existing staff
- Having to fit in with BPO’s existing process which doesn’t suit your needs.