Outsourcing - Contracting

Outsourcing is the action taken by an organization to move a part of its internal processes to an outside entity or group to improve efficiency, quality, or reduce time to deliver services or products. In a simpler context “Outsourcing is contracting with another company or person to do a particular function.” The existence of Outsourcing can be dated back to the times when humans devised the “work specialization”. Now a days, this so called outsourcing is being utilized to carry out narrow functions, such as payroll, billing, data entry etc. The entire process of outsourcing brings benefits to the company opting for it in the form of quality improvement, optimum utilization of company resources i.e., resources can be freed to concentrate on novel projects and lastly the most significant aspect of cost-effectiveness.

As every process is performed systematically in a tried and tested way, so also outsourcing comprises of the following stages. 1) Strategic thinking, to originate the organization's philosophy regarding the role of outsourcing in its activities; 2) Evaluation and Selection, to come to a decision on the befitting outsourcing projects and suitable locations for the work to be done by the precise service providers; 3) Contract Development, to work out the legal, pricing and service level agreement (SLA) terms; and 4) Outsourcing Management or Governance, to refine the ongoing working relationship between the client and outsourcing service providers.

The success of outsourcing relies mostly if not exclusively on the following factors namely, executive-level support in the client organization for the outsourcing mission; ample communication to affected employees; and the client's ability to manage its service providers. The personnel responsible for accomplishing outsourcing comprise of both client and service provider professionals, who in turn have to be equipped with an amalgamation of skill set encompassing project management, negotiation, communication, the ability to understand and implement the terms and conditions of the contracts and service level agreements (SLAs), and, above all, very significantly, the willingness to be flexible as business needs change.

Although several forms of outsourcing are thriving in the present market, two forms have been occupying the top slots in the business arena. These include Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO).

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