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The Growth Of Outsourcing

Jul 3, 2008
These past few decades, outsourcing has gone through a lot of changes. From doing simple tasks and functions, service providers nowadays are given more serious and critical jobs related to the company. What used to be considered as a dreaded area to tread into, companies have become fond of offshore outsourcing instead of onshore outsourcing which proved to be more beneficial in terms of the relationship between money and quality. In offshore outsourcing, it has been observed that results yielded are of good quality but obtained at a lower cost.

Today, Business Process Outsourcing (BPO) is growing at an enormous rate. It encompasses back office functions being outsourced offshore. These functions include HR management services and accounting services.

Market Reports
The United Kingdom has overtaken United States to become the leading national market for new outsourcing contracts.UK represented over 37% of the US$16 billion market for major outsourcing contracts awarded worldwide so far this year, according to sourcing advisory firm TPI.

More than 660 multinational companies each bring business worth more than US$1 million (euro820,000) annually to India, where hourly software development rates range between US$18 (euro14.72) and US$26 (euro21.26), compared with onsite rates of US$55-US$65 (euro44.98-euro53.16) in the U.S. and Europe, according to The Associated Press.

The definition of outsourcing is to assign certain functions or processes of a business to a 3rd party organization that provides services related to that specific function. This is done by the virtue of an agreement manifested by a contract that indicates the terms of services which includes the scope and limitations. In this contract, the service provider gets to make use of the resources of the client company while the client company acquires the services from the provider company.

The Boom of the Outsourcing Industry
The rapid growth of the outsourcing industry would have not been possible if not for the rise of the Internet. The increase in Internet users has contributed so much in this industry. The boundaries that separated one nation from the other have been severed by the information superhighway thus making it easier for people to communicate with each other. A person from one side of the world can easily communicate with another person at the opposite side of the planet as if they are just next door neighbors.

With the whole world being wired together, it was very easy to transport jobs to people outside the main nation. And with the advantage of the difference in time zones, tasks and functions can be done on a 24-hour basis when outsourcing.

The Benefits of Outsourcing
1. One of the most important benefits of outsourcing is cost savings. By tapping into the lower cost economies, companies in industrialized nations can take advantage of the developing nations.

2. Outsourcing vendors are usually fee-for-service basis. This means that they are only paid when certain jobs or functions are done. This scheme is very beneficial for companies.

3. Companies become more flexible when it comes to making use of their resources especially in times of cyclical fluctuations.

4. The client company can focus and give more time to the core business activities. The burden of carrying other non-core functions will be handled by other 3rd party service providers.

5. Business process will be sped up due to the fact that certain functions will be taken care of specialists in that area. It is also not just about speed but with quality of work as well.

6. Errors and mistakes can easily be detected and can easily be fixed.

Given these benefits, the outsourcing industry will continue to grow in the future as major parts of businesses.
About the Author
Paul Hata is active in various social and community programs aimed at providing equal access to education,health and jobs to all.Paul has over 10 years experience in managing a multi-million dollar advertising company.Paul can be reached at - TradePlanets.com
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