Who Benefits from Outsourcing Solutions?

The explosive economic and technological growth of India, China, and a number of South-East Asian countries has increased the availability of outsourcing solutions available to companies in the west. Business Process Outsourcing (BPO) in particular, has experienced rapid growth in the areas of customer service, accounting, and information technology. How does the process of outsourcing work, and what benefits do businesses receive by doing it?

What is Outsourcing?

In simplest terms, it is the transfer of business processes to an external provider. A manufacturing outsource provider may be located just a few miles away, while a customer service call center may be located on another continent. Regardless, outsourcing utilizes an external company that specializes in providing a particular service, and can often do so in a more efficient capacity. Outsourcing solutions generally fall under three main categories: operational process, professional process, and business process outsourcing.

Three Kinds of Outsourcing Solutions

Operational process outsourcing is probably the oldest type of business outsourcing. It involves relocating production and manufacturing services offshore where labor is much cheaper and the cost of operating is generally lower. After the North American Free Trade Agreement (NAFTA) was implemented, a number of US and Canadian manufacturing companies relocated some of their manufacturing to Mexico, to lower their operating costs.

Professional process outsourcing relates to the transfer of professional services to external companies with certified experts able to perform industry-specific tasks. Information Technology (IT) outsourcing, legal, and payroll outsourcing are all fields that have seen steady growth. There are also many companies availing themselves of offshore software development and a wide range of consulting services. In general, professional services are outsourced on a project-by-project or fixed-term basis.

Business process outsourcing (BPO) encompasses a scope of operations that includes customer service, technical support, and a limited range of managerial functions. Specialized providers are able to offer solutions available around the clock while also incurring the equipment, training, and human resource costs themselves.

A quick browse through Google’s search results will yield a list of outsourcing companies dozens of pages long. Why have so many companies sprung up over the past decade?

Benefits Realized from Outsourcing Solutions

Each type has its own benefits and disadvantages. However, the reasons for choosing to outsource particular business operations include:

it reduces overhead costs such as investment in equipment, buildings, and technology

a higher standard of quality can often be obtained from manufacturing or services specialists

contracting out non-core business operations allows a company to focus on its core operations

the cost of off-shore labor in manufacturing and labor is often much lower

it often results in a faster delivery of services, since specialists are able to work more efficiently and achieve greater economies of scale

The necessity to control costs and the growing number of credible, low-cost outsourcing solutions has created an industry that is indispensable in turbulent economic times.