Outsourcing or outsourcing is a tool that allows companies to focus on doing what they really do well
Outsourcing arises in response to the already known postulate that states that there is no company that is truly productive in all its activities and, as is known, modern companies have many fields of activity in which it is truly difficult to achieve high performance by themselves.
But before we take a closer look at outsourcing, let's take a quick look at its history:
The first thing we must know is that globalization processes have had a strong impact on the developments of the administration of our time, these same processes have made competition much fiercer, technology to develop more quickly and, of course, that companies that commonly operated in local markets will become international, entering to bite market portions of the large established corporations.
This fact hit large firms, which, in their attempts to preserve their supremacy, have developed tools that are not really recent discoveries, but which ultimately constitute new developments. One of them is otsourcing, which was practically born at IBM as a strategy against new competitors.
In addition to economic globalization, a world economic recession appeared in the late 1980s that forced firms to establish cost reduction as a policy of competitiveness and efficiency. This situation allowed outsourcing to gain even more strength, since, in addition to increasing specialization, it allowed reducing costs.
Definition. Outsourcing is the process in which a firm identifies a portion of its business process that could be performed more efficiently and / or more effectively by another corporation, which is contracted to develop that portion of the business. This frees up the first organization to focus on the core part or function of its business.
Knowing a little better where outsourcing came from, let's try to understand which activities are likely to be outsourced:
Today outsourcing is very widespread in the business environment, perhaps this situation has led to errors, since in many cases operations or processes have been outsourced that instead of improving organizational performance have worsened it. This is because the decision to outsource is not made based on sufficient analysis, but is made based on instinct or experiences that other companies have had.
Before giving part of the company's operation in outsourcing, a thorough study must be carried out that has enough information in all areas, costs, human resources, management, economic environment, suppliers,…
All the activities of a company can be outsourced, except for those that make up its “core business”, that is, the basic and most important rule is not to outsource any of the functions or areas that are considered fundamental in the company. For example, Microsoft will never outsource its programming and development of its software, that is its fundamental task, but it will do so with the merchandise delivery service.
There are activities that generally any company can carry out in otsourcing, such as: payroll management, collection of difficult recovery accounts and in general legal matters, some production processes, market research or promotional campaigns and general cleaning services, dining room or surveillance.
The main advantages generated by outsourcing are presented in the reduction of costs and in the increase of quality as a consequence of focusing on your true competition. Despite having great advantages, otsourcing also has drawbacks, the following case shows some of them:
In the United States, the Kodak Corporation shipped its data processing operations out of the company, into a special facility that IBM built and operates for Kodak. Kodak's savings (when sourcing its data from outside) are estimated to be several hundred million dollars over the next decade, primarily due to increased efficiencies from better technology, economies of scale, innovative software practices, and people more capable. It is also true that Kodak thus lost control over the data collection mechanisms, since it must ask IBM for any variation or innovation it wants, while depending on its third party in terms of implementation times and methods. (1)
Due to the importance that the third party takes in the development of the business, the outsourcing agreement should be sought to go beyond the borders of simple subcontracting to enter the field of alliances, thereby ensuring a greater commitment on the part of the contractor, Furthermore, if we take the case presented above, confidentiality should be a key point of outsourcing, since key business information is being given to the third party.
In conclusion, although outsourcing has a lot to do with outsourcing, it is not only that, it is rather establishing alliances with collaborating firms that will make our fundamental tasks more efficient.
References:
- (1) Concepts and reflections on outsourcing http://www.consejo.org.ar/coltec/out1.htmOutsourcing Tools for Economic and Strategic Analysis http://www.consejo.org.ar/coltec/out.htm hidden cost of outsourcing. In: Management Magazine. Vol. 1, No. 2, March - April 1996. pp. 116 to 123
