Outsourcing is the process in which a company for perform its businesses function or process internally, contracts to other one independent organization for the services. However the company does not purchase the services or products rather it termed as outsourced from the independent company, which called as the service provider. The entire process occurred as internally for the company and it is internally tie up between both the organizations. Today it has become a common feature for the business company and it has achieved a global acceptance today.
Generally a major company, which has vast business set up, engaged itself in the outsourced activity for the fulfillment of its requirement and also cost cutting. The outside firm, which provides the services or products to the central company, is known as service providers and treated as a third party for the products. Big companies have been started outsourcing model for narrow functions, which help it in better service and curtaining extra worker.
Theses companies take the help from other independent organization in terms of pay roll, billing and data entry activities. For fulfillment of these requirements company will have to appoint some extra work staff and it will witness extra monetary burden for the company. Thus by the help of outsourcing, company encouraged cost cutting move for its economic health.
It has become more popular and effective for those companies, which are located overseas and where labour cost, appears high. Such companies choose such a country where labour cost is lower and then it contracts to those organizations, which can provide the services and products on the lower cost level. Although due to major distance between both the organization cost more in terms of transportation and other reason, despite this the overall cost of products appear less than its expectation and that is why company prefer outsourcing such a products or services. It also provides employment and other facilities to such a places.
Outsourcing has encompasses a major frontiers today and it has been practices in number of activities. Information technology is a major requirement for the success of any company in the competitive era. But it is not possible for each company to strength its IT department for the success of its company because it increases its cost and can affect its all strategy for the future. Call centers, Business Processing all are the various uses of outsourcing which help companies for the expansion of its name and business.
Cost cutting is the major factor for the companies and every company want to save its extra expenditure. Outsourcing helps those companies in this move. Outsourcing help company for the restriction of its staff and it also results in lower cost of its products.
Another major advantage for the company is that it focus on its core business only and our sources the subsidiary services and products from outsider companies.
Logistics and human resources management is another means where outsourcing is on boom today. Logistics is directly related to the chain system of the company, which ensured supply of goods on time and on demand. It is not possible for a company to establish its own transport department for supply of the product to its entire customer expanded in various part of the country. Thus logistic can be outsourced for successfully running of the company and also in terms of cost cutting attitude.