Outsourcing Essay Example | Topics and Well Written Essays - 1000 words

Outsourcing - Essay Example Many companies have always hired contractors to support them during peak seasons at different intervals in the year. There is a vast difference between sub contracting and outsourcing of a particular activity. The main variation is with restructuring of the organizational structure when the activity is being outsourced which includes hiring employees at different locations to do the same activity. (1) History: The idea of outsourcing began during the industrial revolution where companies took advantage of the economies of scale to increase their profits by expanding their corporate and manufacturing base. Most of the companies sub contracted some of the ancillary functions to external service providers and this was regarded as the evolution of outsourcing. Outsourcing was not categorized as a strategy by the companies until 1989 when Kodak Company headed by Eastman Kodak decided to outsource information technology as a part of their strategic decision. The companies slowly started fo cusing more on cost saving and value addition to the business which led to outsourcing of even core activities which includes data processing, human resources, customer service, legal, logistics, medical transcription, information technology, payroll to companies in different geographical locations in order to increase profits. (1) Although many areas and operations are outsourced, there are some very common outsourced areas- Information Technology Accounts and finance Data processing Security Network and Communication Human Resources and Administration (3) In support of outsourcing: Outsourcing has become an integral part of any organization and has proved to be a boon to many companies. Many people are against outsourcing as it leads to unemployment in countries like US and UK but the advantages of outsourcing weighs out its disadvantages. Outsourcing proves to be a mutual benefit for both the outsourced and the outsourcing company in many different ways. There are many reasons wh y a company may choose to outsource an operation Cost effectiveness One of the main advantages of outsourcing different processes is for better cost efficiency, reduced operational costs as the workers/employees are paid much lesser than the employees of the company outsourcing, for the same job performed. The Training and the maintenance costs are also cheaper and inexpensive compared to developed countries. The outsourced partners also provide specialized and specific skill sets and knowledge which makes it efficient than the one in developed countries. For the outsourced companies, it does not only mean better revenue and earnings but also have the time to focus on their actual business which would make them more competitive in the international market. Outsourcing work to developing nations helps in improving its infrastructure, employment rates and overall economic welfare. The economy of the developing countries will benefit and promote immensely through outsourcing. (2) Flexi bility Some operations are seasonal in nature and outsourcing helps to bring in additional temporary resources when needed and released once the work is completed. An outsourcing contract provides flexibility to use the resources according to the demands of the market. The service provider will be able to stabilize and use the resources effectively during the peak and dull season. For example, more data entry processors will be recruited during the peak invoicing season. This