Summary
Outsourcing consists of the delegation of functions from one company to another that specializes in this task. Among its greatest benefits are cost reduction and access to new technologies, among others, however, if the service provider does not have sufficient capacity to perform this function, it can damage the image of the contracting company. This tool can be used in a tactical or strategic way and can be adapted to the requirements of the company requesting the service, it is implemented at different levels and in areas of the organization that are not essential in order to gain competitiveness.
Keywords: Outsourcing, outsourcing, outsourcing, human resources
1. Introduction
Outsourcing can also be identified as outsourcing or subcontracting, it represents an efficient administration tool that consists of the delegation, to a specialized company, of tasks that range from the most basic, such as maintenance, to entire processes such as accounting or the recruitment of personnel, this allows the organization the space and time necessary to dedicate itself to the activities and processes that are the essence of it, that is, those tasks that make up the company's line of business, in order to achieve its objectives.
In this process, trust intervenes to a high degree, which is granted to the contractor, since control of a part that makes up the contractor is transferred to it, however this degree of trust and responsibility varies according to the activity or process that It is going to be delegated and the size and business of the company also influences, it must be taken into consideration that in some cases the quality of the product that the company wants to obtain when applying outsourcing may not reach the standards required by it.
2. Development
2.1. Definition of Outsourcing
In order to reinforce the understanding of the concept, some formal definitions by different authors are presented:
- "The term Outsourcing designates the activities or processes of an organization whose performance and administration are in charge of an external company." (Werther & Davis, 2008) “Outsourcing is an English term made up of two words« out »which translated into Spanish means outside and« source »whose meaning is source or origin, that is, the expression refers to an external source, which generally within the business environment is used to refer to subcontracting, outsourcing or outsourcing, which we can define as a process used by a company in which another company or organization is hired to develop a certain area of the contracting company ". (Almanza Martínez & Archundia Fernández) "Transfer services from external resources previously provided internally." (Derose,1999)
2.2. Historical background
Due to the arrival of globalization and the evolution of the markets, companies began to see the needs of delegating some processes of their company to focus on their strengths, previously they preferred to do their processes completely independently, it was considered the best strategy At that time in order not to depend on suppliers, however little by little this strategy began to decline due to lack of capacity, incompetence, lack of technology or the financial situation that some companies began to present, these were the factors that led to organizations to use outsourcing.
It is known that this phenomenon began in the 1940s (20th century) in the United States, however, the first records of outsourcing date from the mid-1960s when organizations considered it necessary to hire centers of computer specialists to help them in their financial and operational areas.
Around the eighties the way was opened for the arrival of Outsourcing due to the need that companies had to compete with others at a global level, with this some of them had to move or open branches abroad allowing them, in some cases To position itself in these markets, this process brought with it various advantages such as minimizing staff costs, injecting marketing into different markets, as well as investing in research and development.
Approximately forty years ago, Outsourcing began to be implemented in Mexico, as companies sought to outsource surveillance and maintenance services, until the organizational trend in the nineties began to be used for the contracting of external personnel services. It is worth mentioning that in Mexico it is considered a business strategy to avoid some fiscal and labor issues.
Nowadays the tendency of companies is to completely delegate some areas of the company and therefore entire processes, so that the organization can implement a business specialization, that is, so that it can dedicate itself entirely to the central activity that maintains the business running and allowing you to make a profit.
2.3. Advantages of Outsourcing
The use of outsourcing brings with it several benefits, among these are:
- It allows you to focus on what is really important: the activity that makes the company earn money Reduce costs, since you can pay less for certain functions, for example cleaning Some Outsourcing companies have technology that is not as accessible for the company that wants to use it It allows to have a lean organization It encourages innovation as new ideas can be obtained The image of the company can be improved by hiring specialized services Some processes corresponding to the human resources area such as negotiations are delegated and recruitment.
2.4. Disadvantages of Outsourcing
Despite being an efficient tool, it can have some drawbacks, some of which are mentioned below:
- Cost reduction may not be enough. There is a possibility that clients may not like the service of the function that was outsourced. Not many outsourcing companies are sufficiently qualified to perform the functions that are delegated to them. If the subcontracted company does not carry out the assigned task well, one of the three main areas of the company may be affected: operational, administrative and financial. As the company is not prepared to delegate a task, there may be a culture shock of the In some cases direct contact with the customer is lost.
2.5. Types of Outsourcing
Below are two ways to classify Outsourcing, the first is with respect to its purpose, which can be tactical or strategic:
Tactical outsourcing
This type of outsourcing is considered as such a simple outsourcing of a function that is not so essential for the company and generally the main reason for implementing it is due to the need to reduce costs.
Strategic Outsourcing
In Strategic Outsourcing, the aim is to create a stable relationship with the company to which a function is delegated, it is considered a strategic alliance which is consolidated according to the interdependence of the delegated task with respect to the others that make up the company, because it seeks to improve the quality of the delegated function, improve some service and / or increase the capacity of the same.
The second way to classify it is according to its nature:
Co-sourcing
This type of Outsourcing occurs when both the company that delegates the function and the one that provides the service share the responsibilities and in some cases the risks of providing the same.
En casa
It occurs when the requested services are performed within the facilities of the company that requested them.
Off-shoring
It is also known as offshoring and is so called when the contracting of services is requested from a company that is abroad, it is used when it offers lower costs compared to nationals.
Off-site
It occurs when services are generated in the facilities corresponding to the company that is providing them.
2.6. Outsourcing levels
Complementary parts
It consists of the purchase of parts or sub-parts that make up the final product, from another company specialized in the manufacture of said parts, generally applied when the company does not have the capacity to produce them or as a strategy to reduce costs.
Individual
This level of Outsourcing is applied when it is only necessary to delegate the function or set of tasks of a worker or administrator, it is mainly used for those positions or activities that are used by the company on a regular basis, but that does not need the employee to be full time in it.
Functional
Outsourcing is used at a functional level when it is necessary to delegate a function or tasks that require a set of knowledge or technical skills in a specialized way.
Process
It includes the delegation of an entire process to another company that specializes in the set of tasks that it requires, it is used regularly in the human resources area with the recruitment process.
2.7. Areas in which Outsourcing is applied
Finance and accounting
Some of the functions that this area comprises are delegated because it is considered that in relation to administration, they are not the core of organizational operations, some of these functions include: payroll, financial systems, tax return, budgets, credits, treasury, among others.
Capital and investment management
It is generally occupied by companies dedicated to investing, since they can delegate that part of financial services, as well as hedge funds and investment funds.
Real estate administration
It involves a responsibility for certain functions such as customer service, cafeteria, parking leasing, physical security, disaster recovery, among others.
Human Resources
The area where there has been the greatest movement and has received the most attention is considered, among the functions that are outsourced are: payroll, recruitment, training, administration of complaints and suggestions and administration of benefits for personnel.
Logistics
It involves non-essential functions for the company with respect to procurement and supplier management such as: deliveries, inventory, packaging, facilities, warehouse management, maintenance or cleaning, receptionist services, among others.
2.8. Outsourcing decision process
The process that involves making a decision for the implementation of outsourcing comprises six steps, which are listed below:
And do
In this step, the person in charge of the process must commit to selecting and implementing the best decision, it begins with a broad overview of the objectives to be achieved and the changes that it will generate in the organization, on which a strategy is generated.
II. Selection of activities
The tasks or functions to be outsourced must be identified and on top of that, search and analyze companies specialized in said activity, subsequently a preliminary selection is made.
III. Choose the company
This step is very specific, since a group of companies is analyzed that is analyzed one by one with respect to specific criteria depending on the needs of the company and the experience and / or level of specialization of the company that will provide the service, also the clauses of the contract begin to be detailed.
IV. Contract
The purpose of this step is to negotiate the document in such a way that neither party needs to consult it, since it will detail the agreements that are reached, restrictions and the obligations of both parties are also added.
V. Transition
At this point the company has already been selected and the contract has been detailed, so now a transition plan is presented in which the measures of progress that the company that is hired must have are stipulated.
SAW. Manage and improve
Because Outsourcing requires a structure, it must be reviewed by both parties, so someone must be put in charge to monitor the operation, a system of standards is established to measure the efficiency of the service and verify that the requirements are being met. planted objectives. Subsequently, a feedback system is developed and evaluations are made on it.
3. Conclusion
Outsourcing represents a way in which the company can separate itself from those functions or activities that are not so essential, in order to focus on those that leave a profit margin, within its various benefits the reduction in costs can be fundamentally highlighted, since this allows the company to increase the aforementioned margin, despite the fact that it entails some inconveniences, these are considered minimal since in general if the company that offers the outsourcing service is up to the quality required by the organization that requests it, the only thing that should be taken into account for the implementation of this task would be the maturity that the company has to contract said service, because if it does not have a well-defined structure,there may be an organizational culture clash that damages it. On the other hand, according to the purpose of the contracting service, many benefits can be obtained for the company, mainly if the strategic approach is chosen since the generation of a long-term relationship with a company dedicated to outsourcing can improve the quality of the products of the first and the quality of the services of the second.
Bibliography
- Almanza Martínez, M., & Archundia Fernández, E. (sf). Outsourcing and tax planning in Mexico. Mexico: University of Guanajuato. Ashley, E. (2008). Outsourcing for dummies. Indianapolis: Wiley Publishing Inc. Chapman, J. (2005). Learn how to outsource. In a week. Spain: Ediciones Gestión 2000.Derose, GJ (1999). Outsourcing Training and Education. American Society for training and development Graver, MF (1999). Strategic Outsourcing, A structured approach to outsourcing decisions and initiatives. AMACOM. Mael, FA, & Beaubien, JM (nd). Outsourcing of Human Resources Services. USA: American Institutes for Research.Mclvor, R. (2005). The Outsourcing Process. United Kingdom: Cambridge University Press.Mclvor, R. (2010). Global Services Outsourcing. USA: Cambridge University Press Menguzzato Boulard,M. (2009). Business management facing the challenges of the 21st century. Spain: University of Valencia Werther, WB, & Davis, K. (2008). Human resources management. Mexico: Mc Graw-Hill.
