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Outsourcing 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 an exchange of services and payments. Of recent concern is the ability of businesses to outsource to suppliers outside the nation, sometimes referred to as off shoring or offshore outsourcing.

Outsourcing is any task, operation, job or process that could be performed by employees within an organization, but is instead contracted to a third party for a significant period of time. In addition, the functions that are performed by the third party can be performed on-site or off-site.
The practice of having certain job functions done outside a company instead of having an in-house department or employee handle them; functions can be outsourced to either a company or an individual

Outsourcing is an arrangement in which one company provides services for another company that could also be or usually have been provided in-house. Outsourcing is a trend that is becoming more common in information technology and other industries for services that have usually been regarded as intrinsic to managing a business.

Business process outsourcing (BPO) It is a subset of outsourcing

that involves the contracting of the operations and responsibilities


of specific business functions (or processes) to a third-party service provider. Originally, this was associated with manufacturing firms, such as Coca Cola that outsourced large segments of its supply chain. In the contemporary context, it is primarily used to refer to the outsourcing of business processing services to an outside firm, replacing in-house services with labor from an outside firm.

BPO is typically categorized into back office outsourcing - which includes internal business functions such as human resources or

finance and accounting, and front office outsourcing - which includes customer-related services such as contact centre services.

Legal Process Outsourcing (LPO) It refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company. LPO services is at a nascent stage with relatively consistent market growth since emergence of LPO in 1997. They traditionally offer services in the areas of document review, legal research and writing, drafting of pleadings and briefs, and patent services outsourcing. The Recruitment Process Outsourcing -- RPO is defined as: when a provider acts as a company's internal recruitment function for a portion or all of its jobs. RPO providers manage the entire recruiting/hiring process from job profiling through the onboarding of the new hire, including staff, technology, method and reporting. A properly managed RPO will improve a company's time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce cost and improve governmental compliance.

Knowledge process outsourcing (KPO) -- It is a form of outsourcing, in which knowledge-related and information-related work is carried out by

workers in a different company or by a subsidiary of the same


organization. KPO firms, in addition to providing expertise in the processes themselves, often make many low level business decisions. Knowledge process outsourcing (KPO) is the term used to describe outsourced support that requires deep domain knowledge and the exercise of judgment and interpretation. It differs from traditional BPO outsourcing, which tends to focus on rules-based processing. KPO

typically requires people with higher education, specific skills, and


specialized business experience.

Engineering process outsourcing (EPO) -- EPO industry plays a crucial role in efficiently supporting dynamic architecture, engineering and construction industries worldwide. EPO is different from manufacturing and information technology for the simple reason that each project is unique. AEC industry has huge variations and immense complexity its history is as old as human race and its growth has been compounding with technological growth.

Third Party Logistics--Third party logistics providers specialize in integrated operation, warehousing and transportation services that can be scaled and customized to customers' needs based on market conditions and the demands and delivery service requirements for their

products and materials. A third-party logistics provider (abbreviated


3PL, or sometimes TPL) is a firm that provides a one stop shop service to its customers of outsourced (or "third party") logistics services for part, or all of their supply chain management functions.

Cost savings It involves lowering of the overall cost of the service to the business, which is done by reducing the scope, defining quality levels, re-pricing, re-negotiation, and cost re-structuring. Access to lower cost economies through off shoring generated by the wage gap between industrialized and developing nations. 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 specialized IT services companies. Liability Organizations choose to transfer liabilities inherent to specific business processes or services that are outside of their core competencies.

Improve quality Achieve a steep change in quality through contracting out the service with a new service level agreement. Knowledge Access to intellectual property and wider experience and knowledge. Contract Services will be provided to a legally binding contract with financial penalties and legal redress. This is not the case with internal services. Operational expertise Access to operational best practice that would be too difficult or time consuming to develop in-house.

Access to talent Access to a larger talent pool and a sustainable source of skills, in particular in science and engineering. 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. Enhance capacity for innovation Companies increasingly use external knowledge service providers to supplement limited in-house capacity for product innovation.

Reduce time to market The acceleration of the development or production of a product through the additional capability brought by the supplier. 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. Scalability The outsourced company will usually be prepared to manage a temporary or permanent increase or decrease in production. Creating leisure time Individuals may wish to outsource their work in order to optimize their work-leisure balance.

Loss of control Loss of control is rated as one of the major challenges to outsourcing. Organizations going for outsourcing, are left with very little or no control over their partner. In addition to that, organizations often are not able to keep up with the consistency and quality across the channel. Know how Randomly applied know-how, unplanned customization work, lack of standards, and scarcity of capable resources can twirl programs into a failure. Coverage Measuring the results and finding the business focused information about the the consultant are difficult or impossible to get. These challenges prevent the organizations to obtain the true insight of consultancies.

Dispersed Locations Many organizations engage consultancies in

different geographical regions that adds complications to the


delivery and scheduling of processes. Most of the times a process has to be localized for different languages and cultures which requires specific resources.

Budget Inadequacy Budget is one of the major constraints to selecting the right consultancy for outsourcing a process. Selection of appropriate offshore location Political and economic reliability of the country Language and talent set of local population The condition of the country's existing telecommunications infrastructure.

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Selection of ideal outsourcing partner Price Expertise in a particular industry Integration capabilities Training and qualifications Overall customer service strategy Company information privacy Knowledge in latest technology

United States Outsourcing became a popular political issue in the United States during the 2004 presidential election. The political debate centered on outsourcing's consequences for the domestic U.S. workforce. Criticism of outsourcing in US revolves around the costs associated with transferring control of the labor process to an external entity in another country. A poll conducted in August 2004 found that 71% of American voters believed that outsourcing jobs overseas hurt the economy while another 62% believed that the U.S. government should impose some legislative action against companies that transfer domestic jobs overseas, possibly in the form of increased taxes on companies that outsource.

European Union

They have a directive under which, rights acquired by employees with the former employer are to be safeguarded when they, together with the undertaking in which they are employed, are transferred to another employer, i.e. the contractor. In principle, employees of an enterprise outsourcing part of its activities in which they are employed may benefit from the protection offered by the directive.

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