Introduction: -In many big establishments, shops, markets or bazaars you will find security guard who are monitoring the parking around the place. These guards are not employee of the establishments but have been recruited through an agent. This agent provides the establishments with the services of the guards. In other words, the establishment has outsourced the security services.
Outsourcing is the process of contracting a business function to specialized agencies. In doing so, the company benefits in two ways:
1. It reduces its own cost.
2. It uses expertise of the firm which specializes in a particular kind of service.
Generally companies outsource their non-core areas. E.g. in many corporate organizations, hospitals, etc. the canteen and sanitation services are usually outsourced to contractors. The contractors enter into an agreement with the company for providing the service. The waiters at the canteen or sanitation workers are not employees of the company but work directly under the contractor. The company makes payments to contractor who in turn pays his employees.
Another example of outsourcing is seen in weddings. The wedding planner outsources all services like decoration, catering, band, etc, to providers who are experts in these areas.
Now-a-days many municipal corporation and municipalities have outsourced collection of household waste to private companies.
· Need for Outsourcing
Today services all over the world are becoming highly specialized. Most services require finely tuned skills. With increasing global competition, most companies are focusing on showcasing their products or improving the quality of their goods. This has forced companies to concentrate on their place in the world market. Therefore, companies are taking a fresh look at their business processes. Due to this, many non-core areas are being outsourced to firms who have an especially skilled work force. The concept of outsourcing has emerged as a result of this thinking.
· Advantages of Outsourcing
1. It leads to better efficiency and effectiveness.
2. The companies are able to focus their attention on improving the quality of their product.
3. Outsourcing leads to cost reduction for the company. The cost of outsourcing services is much less than keeping such a large work force on the rolls of the company.
4. Manpower through outsourcing is available at a lower cost.
5. Investment requirements of the company are reduced.
6. Outsourcing helps in knowledge sharing between organizations.
7. It stimulates entrepreneurship, employment and exports in the country from where outsourcing is done.
· Disadvantages of Outsourcing
1. There is always a danger of the misuse of company information by the contractor.
2. Many companies compromise on the quality of outsourcing in order to cut costs. This is especially seen in the IT sector where companies try to get cheap manpower from the other countries.
3. In some cases, companies ignore ethical issues related to outsourcing.
4. The quality of the outsourced service is sometimes not up to the mark.
