DEFINITION OF OUTSOURCING
Outsourcing is a business practice where a particular company will hire someone who does not work for their company such as another company or a freelancer to do particular tasks for them. Typically, tasks outsourced will be highly repetitive or specialized tasks such as calling long lists of names with a particular call script, accounting, programming, data entry, technical support, payment processing, or some other specialized task.
REASONS FOR OUTSOURCING
The reason companies outsource work to other companies are multi-fold. One reason could be to:
Save Time — so that employees and management can focus more on the core competencies of the company such as selling widgets while outsourcing bookeeping and reminder calls to companies who specialize in those particular tasks. Another reason could be:
Cost Cutting — Many outsource companies are located in India, The Philippines, or Eastern Europe where labor costs are lower than the United States, hence, creating an opportunity to capitalize on less expensive labor.
Skill Optimization — is yet another reason to outsource work as outsourced companies specialize in particular tasks such as blog set up, eCommerce site creation or XML conversion while your company specializes in widgets.
Eliminating Uneven Schedules — if you have a job to be done that will take only 10-15 hours a week on some weeks and more or less hours on other weeks, hiring a full-time or even part-time employee is a commitment that you will have trouble keeping. If that employee quits in the middle of a project, you’ll have another problem. It might be easier to outsource the project to a company who specializes in that task and has dozens of people who know exactly how to do it rather than hire your own staff.
Reducing Hiring — hiring and firing is expensive and is an art form that you might not have time to master. If you have a particular job that people are always quitting every two months, it might be easier to have the job outsourced to Manila where they have full-time HR managers to handle the hiring and firing for you! That way you can focus on widgets instead of dealing with people who quit on a whim leaving you high and dry. The outsourced company you hire will have plenty of backups all in the same specialty when the employee assigned to you quits.
TYPES OF OUTSOURCING ARRANGEMENTS
Freelancers — Some companies hire freelancers which is a type of outsourcing.
Fixed Schedule — Others hire another company for a particular schedule with a contract which extends for a particular number of months or years such as 40 hours a week for two years.
Employee Leasing — Some companies hire a team of workers from an agency which is sometimes called “employee leasing.” Other companies pay for results in specialties like lead generation rather than paying for particular hours of work.
Assignment Based — Programming or software development outsourcing often has a company pay for a completed product or for a particular number of hours to do a particular job although there is very rarely a deadline.
On Call — Some outsourcing is on an on call basis. Programmers might be hire to fix code only when it breaks or to do programming work as needed. Call centers might have a small assignment from time to time only when needed.
CATEGORIZATIONS OF OUTSOURCING JOBS
Outsourcing jobs are sometimes categorized using particular terms such as:
ITES — Information Technology Enabled Services which could include data entry using computers, web design, technical support, or other tasks which involve technology to facilitate the task in some type of a way.
KPO — Knowledge Process Outsourcing is also a bype of Business Process Outsourcing that includes tasks that require a higher level of education, knowledge or skills such as Accounting, Software Development, Research, etc.
LPO — Legal Process Outsourcing focuses primarily on legal research, patent research, contract drafting and legal support services, but rarely involves actually going to court.
RPO — Research Process Outsourcing or Recruitment Process Outsourcing. Research outsourcing is popular in Bangalore, India as there are many companies that offer market research, web research, and Pharmaceutical research. RPO could also be a form of human resources outsourcing where an outside company will help you find employees or leased agents. This is by far the least popular form of international outsourcing as there are few providers who offer overseas assistance with recruitment.
HRO — Human Resources Outsourcing as mentioned above is the least popular form of international outsourcing as there are very few overseas companies who offer competent service in this industry. However, there are a few companies in India and the Philippines that allow you to lease call center agents and programmers at low rates. However, the quality of such help is dubious and not guaranteed in any way by the provider company.
MBPO — Medical Business Process Outsourcing includes outsourcing of Medical Billing, coding and Medical Transcription. Quality standards and billing in these fields is a lot more uniform than in other BPO tasks as companies can charge a percentage in Medical Billing and can offer rates per number of characters or words (or lines) in Medical Transcriptions. Quality standards are also easy to measure as there are international standards for Medical Billing and Medical Transcription. You can measure errors as a percentage rate. If a company makes more than a particular fraction of a percent of errors, they generally go out of business or get fired.
TYPES OF OUTSOURCING JOBS
Commonly outsourced jobs might include: Accounting, Bookkeeping, Call Center, Data Entry, ePublishing, Legal Research, Market Research, Medical Billing, Medical Transcriptions, Social Media, Software Development, and Web Design. However, there are many specialties in most of these types of outsourcing jobs.
Accounting Specialties — Bookkeeping, Tax Preparation, Payroll, Bank Reconcilliation
Call Center Specialties — Appointment Setting, Chat Support, Collections, Customer Help Desk, Data Verification, Email Support, Inbound Customer Care, Lead Generation, Order Taking, Outbound, Survey Taking, Technical Support, Telemarketing, Ticket Sales,
Data Entry Specialties — Data Capture, Data Cleansing, Data Conversion, Data Entry, Data Mining, Data Processing, Data Quality, Data Security, Data Transcription, eCommerce Data Entry, Forms Filling, Forms Processing, Image Processing, Product Data Entry, Scanning, etc. Data Conversion includes XML, SGML, HTML5 conversion, PDF or JPG conversion, and conversion from one language or format to another.
Social Media tasks might include article writing, proofreading, posting on Facebook, managing a Twitter account, LinkedIn, Instagram, Pinterest, or any of the other common social media platforms. Most companies specialize in several social media platforms, but cannot provide service for ones they are not familiar with or don’t have sufficient staff for.
Software Development Specialties — Blog Set up, eCommerce Set up, Software Testing, Web Design, Employee Leasing, etc.
Common software languages include: C, C#, C++, ERP, J2ME, Java, jQuery, LAMP, MySQL, .Net, OpenSource, PHP, Ruby on Rails, SAP, SQL, XML, and more.
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Wikepedia’s article on — outsourcing
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Entrepreneur’s article on — outsourcing
See our informational page on the term — outsourced.
See 123outsource’s compilation on best articles about outsourcing.
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