NAME- SHITAL D.

ZELE ROLL NO- 747 ASSIGNMENT- OUTSOURCING COLLEGE- RAJIV GANDHI INSTITUTE OF TECHONOLOGY SUBMITTED TO- PROF. KIRAN WAGLE

OUTSOURCING
Outsourcing refers to hiring another company to perform a task that is currently performed internally. Outsourcing is subcontracting a service, to a third-party company. Outsourcing involves the transfer of the management and/or day-to-day execution of an entire business function to an external service provider.The client organization and the supplier enter into a contractual agreement that defines the transferred services. A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function - commonly one previously performed in-house-to an external provider. In this sense, two organizations may enter into a contractual agreement involving

anexchange of services and payments. Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as offshoring or offshore outsourcing (which are odd terms because doing business with another country does not mean you have to go offshore) In addition, several related terms have emerged to grasp various aspects of the complex relationship between economic organizationsor networks, such as nearshoring, multisourcing and strategic outsourcing

BENEFITS OF OUTSOURCING
Access to expertise Focus on Core Business. Lower cost Higher quality Expensive capital goods requiring scale Enhance capacity for innovation Capacity management. Access to talent.

RISK OF OUTSOURCING
Contract risk Outsource firm risk ( insolvency, strikes) Future pricing risk Compromise in competitive advantage Information privacy risk Firm specific task

REASONS OF OUTSOURCING
Organizations that outsource are seeking to realize benefits or address the following issues: 1. Cost savings The lowering of the overall cost of the service to the business. This will involve reducing the scope, defining quality levels, re-pricing, re-negotiation, and cost restructuring. Access to lower cost economies through offshoring called "labor arbitrage" generated by the wage gap between industrialized and developing nations.

2. Focus on Core Business Resources (for example investment, people, infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specialised IT services companies.

3. Cost restructuring Operating leverage is a measure that compares fixed costs to variable costs. Outsourcing changes the balance of this ratio by offering a move from fixed to variable cost and also by making variable costs more predictable.

4. Improve quality Achieve a steep change in quality through contracting out the service with a new service level agreement.

5. Knowledge Access to intellectual property and wider experience and knowledge.

6. Contract Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services.

7. Operational expertise Access to operational best practice that would be too difficult or time consuming to develop in-house.

8. Access to talent Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering.

9. Capacity management An improved method of capacity management of services and technology where the risk in providing the excess capacity is borne by the supplier. 10. Catalyst for change An organization can use an outsourcing agreement as a catalyst for major step change that can not be achieved alone. The outsourcer becomes a Change agent in the process.

11. Enhance capacity for innovation Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

12. Reduce time to market The acceleration of the development or production of a product through the additional capability brought by the supplier.

13. Commodification The trend of standardizing business processes, IT Services, and application services which enable to buy at the right price, allows businesses access to services which were only available to large corporations.

14. Risk management

An approach to risk management for some types of risks is to partner with an outsourcer who is better able to provide the mitigation.

15. Venture Capital Some countries match government funds venture capital withrivate venture capital for start-ups that start businesses in their country.

16. Tax Benefit Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country.

17. Scalability The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production.

18. Creating leisure time Individuals may wish to outsource their work in order to optimise their workleisure balance.

SECURITY
Before outsourcing an organization is responsible for the actions of all their staff and liable for their actions. When these same people are transferred to an outsourcer they may not change desk but their legal status has changed. They are no longer directly employed or responsible to the organization. This causes legal, security and compliance issues that need to be addressed through the contract between the client and the suppliers. This is one of the most complex areas of outsourcing and requires a specialist third party adviser. Fraud is a specific security issue that is criminal activity whether it is by employees or the supplier staff. However, it can be disputed that the fraud is more likely when outsourcers are involved.