The economist, Adam Smith, says in his treatise The Wealth of Nations, "If a foreign country can supply us with a commodity cheaper than we ourselves can make it, it is better to buy it of them." Outsourcing as we know it today is merely a progression of an idea that has existed since early days of trade.
As companies grow in size and operations, it becomes increasingly clear that their focus has to be redirected to their core activities while the non-core functions can be 'sent out' or 'outsourced' to vendors specialized in that particular function.
Have you found yourself faced with any of the following doubts in recent times?
Are my resources being utilized effectively?
Are my current resources capable of supporting new technology?
Is there a quicker, more effective method to handle processes?
Does my team have the operational expertise to do the task assigned?
Are we working at optimum costs?
If you are asking yourself the question 'why should I outsource', consider the following top reasons for outsourcing cited by companies that have successfully made offshore outsourcing work for them.
One of the most talked about advantages of outsourcing to locations like India is the cheap labor costs in these countries. Processes outsourced to these locations are done at much cheaper rates and same quality levels as in the donor location. This translates into major cost savings for companies. They also save on operational costs such as payroll, administrative costs, HR, power, rentals and utilities as processes move to other locations.
Companies outsource to vendors who have domain expertise in the outsourced process. Their experience in the field translates into greater operational efficiencies for the outsourcing company. Their skilled expertise will produce better results within a faster turnaround time and thereby increase your turnaround time to your customer. On time deliveries result in happier customers.
One of the key reasons why outsourcing has become a necessity is the shortage of talent in countries like the U.S. and UK. As the previous generation of workers approach retirement, there are precious few newcomers coming in to fill the skills pipeline. The obvious outcome of this acute talent shortage is an increased demand for skills wherever they may be available.
Industries in the U.S. and UK are subject to seasonal fluctuations in work and lack of workers during holidays and off-seasons. One of the advantages of outsourcing such processes to countries like India and Philippines is that companies can deal with peak workloads and poor staff strength during vacations and holidays.
Companies often need to build one time applications. Such ad hoc or one time applications will require which require high manpower resources and companies find that they are faced with the need to ramp up in relatively short time spans. Outsourcing such needs is the best solution for companies that want to avoid expensive outlays for the short term.
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Despite outsourcing having come into a lot of controversies in recent times, industry watchers predict that outsourcing as a business practice is on a growth mode. More and more companies are drawing up plans to outsource work to offshore locations. The trend is clearly in favor of outsourcing larger volumes of work. Vendors are moving up the value chain to include in their service offering a range of additional services that require greater skills, research support and expertise. As offshore vendors become more streamlined and improvise on the offshore outsourcing model, it is not difficult to see why outsourcing is here to stay.