Outsourcing is the process by 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 its core business function. (The English term outsourcing has been translated into Spanish as outsourcing or outsourcing).
In other words, outsourcing consists of a company hiring a specialized external agency or firm to do something in which it does not specialize.
A good example is payroll. Every business has to handle it, but there are specialized firms that can do it better and at a lower cost than any other business. The company you hire provides basic information about its staff, the firm hired is in charge of calculating the payments and writing the checks. This is more economical since it avoids having a whole department in charge of payroll, paying the salaries of the people in the department, running expenses such as social security, pension funds, etc.
Another example is the computer service, these can be rented, together with their maintenance, repair and updating, which avoids unnecessary costs of personnel and equipment renovation, for example.
Almost everything can be contracted under outsourcing, the rule is to compare the costs of what is going to be contracted with the costs of doing it ourselves, in many cases it is better to hire, but in many others not. Before outsourcing, several aspects should be carefully analyzed, including:
- The costs The background, references and experience of the firm to be hired Know, as far as possible, the concept of another company that has outsourced in the area we plan to hire Establish the importance of the area or function we want contract, if it is considered vitally important for our company, we should not outsource it.
The basic and most important rule is not to outsource any of the functions or areas that we consider fundamental in our company. Microsoft will never outsource the programming and development of its software, that is one of its fundamental tasks, but it will do so with the cleaning service of its headquarters for example.
Outsourcing is good, but doing it lightly can result in high costs and potential business interruptions. Another factor to take into account has to do with the legal part of the contract, leaving the conditions and sanctions well established in case of non-compliance by the contracting firm.
Outsourcing has a lot of outsourcing, but it is not only that, it is more about establishing alliances with collaborating firms that will make our non-fundamental tasks more efficient.
In the video below, Benjamin Tripier makes a fairly clear synthesis of the concept of outsourcing:
Mora (p. 183) states that:
Outsourcing is the process that allows an organization to increase its capacity to develop a certain activity, delegating this development to a company that is specialized in the type of activities that are outsourced.
The causes of outsourcing can be supported by:
- Increase the company's capacity to develop certain activities in which it is not specialized, allowing it to delegate said development to specialized organizations Reduce investment to acquire assets that may become a burden for the organization Reduce the time and costs of implementing new developing
In times of economic readjustment, outsourcing is an attractive option for companies by allowing to reduce the costs of a part of the business development quickly, disposing of assets that may be unnecessary to comply with the business strategy.
But outsourcing is not an ideal option where all are advantages, one of the main disadvantages is that it conditions the development of one company to the strategy of another.
Stolovich (p.3) states that:
It is said that there is an outsourcing process when a certain activity ceases to be developed by the workers of a company and is transferred to another company. This other company is a "third party", hence the name "outsourcing" to the process by which activities are transferred to it. Given the nature of what happens in such cases, we could find another name to baptize this process: outsourcing. The activity that previously took place internally, within the company (and which was therefore "internalized"), becomes "outsourced", that is to say, to develop outside the company.
Outsourcing, or outsourcing, is a process that can have two independent, although not exclusive, aspects:
- the partial or total deactivation of productive sectors (such as cloth cutting in the garment factory). The outsourcing company stops "producing" and starts "buying" products from other companies, hiring one or more "third party" companies that place workers to perform a service within the client company. Or from another angle, they go on to perform services that were previously performed by workers from the outsourced company. The most common cases are with cleaning, surveillance and porter, transport, certain maintenance activities, dining room and other services
Advantages of Outsourcing
- Manufacturing costs decline and investment in plant and equipment is reduced Enables the company to respond quickly to changes in the environment Increase in company strengths Helps build shared value Helps redefine the company Build long-lasting competitive advantage through rule change and broader organization reach Increase commitment to a specific type of technology that improves delivery time and quality of information for critical decisions Enables the business to own what Better technology without the need to train the organization's personnel to handle it Allows to have information services quickly considering competitive pressures Application of talent and resources of the organization to key areas.It helps to face changes in business conditions, increased flexibility of the organization and decreased fixed costs.
Disadvantages of outsourcing
- Stagnation in terms of innovation by the external supplier The company loses contact with new technologies that offer opportunities to innovate products and processes When the external supplier learn and have knowledge of the product in question, there is the possibility that they will use them to Start your own industry and become a supplier to a competitor Cost saved with the use of Outsourcing may not be as expected The fees increase the difficulty of re-implementing activities that once again represent a competitive advantage for the company High Cost of changing supplier in case the one selected is not satisfactory Reduction of benefits Loss of control over production.
Bibliography
- Mora Pérez, José Juan. Capacity Planning IT: A Practical Approach, 2012Stolovich, Luis. Outsourcing What do you eat with? CIEDUR,
