Even though the process has been around since the thought of economic specialization and work delegation surfaced hundreds of years ago, the term ‘outsourcing’ had not been applied until the 1980′s. This simply means the procedure for contracting the products or employing the expertise of another company to carry out particular activities or areas of business. Therefore, these companies are generally referred to as third-party or service providers.
Since then, several bywords or branches of the outsourcing process came into the picture. There’s Business Process Outsourcing (BPO) which usually would handle payroll services, compensation and benefits management, along with other functions that aren’t part of the key business strategy. Another segment is (ITO) Information Technology Outsourcing also known as IT-Enabled Services (ITES) which often focuses on IT related functions, including applications development and administration, data center and testing procedures.
Some other spin-offs of the outsourcing solution are the (KPO) Knowledge Process Outsourcing and Business Transformation Outsourcing (BTO). The former involves procedures that require greater skills and expertise for instance legal functions, research and development, and quality assurance; while the latter involves service providers that perform a portion in creating more dynamic and flexible projects for the business.
Many more have been in existence before but are being brought back to life due to the outsourcing growth, such as Software R&D to create and enhance computer programs, and Marketing Outsourcing ex. advertising agencies to market the company’s image.
The position of the service provider is also used to classify outsourcing. When the contractor is in the client’s country, it is referred to as ‘onshore.’ For all those outside the client’s country, they are referred to as ‘offshore’ except when it’s actually a neighboring country, it becomes ‘nearshore.’
The strategy of outsourcing has a lot to do with expertise. Outsourced functions are usually those that are not crucial or strategic to the business, such as compensation or janitorial services. You will find companies who dedicate themselves to these kinds of services so you can be assured of adequate and qualified personnel. Also, outsourced workers would often mean less expenses and inconvenience than being done in-house.
