Explain the features of outsourcing.



Meaning : Outsourcing means contracting out non core & routine activities to outside agencies with a view to benefiting from their experience, expertise & efficency e.g. Reliance Industries Ltd. wants to advertise its ‘Vima’ brand of clothing. it may appoint ‘X Advertising Co. to design, prepare & release advertisements on its behalf.

Nature / Salient features of outsourcing :

  1. Outsourcing involves contracting out : 
    e.g. activities like sanitation, (cleanliness) outside agencies on contractual basis.

  2. Generally non-core business activities are outsourced :
    1. Financial Services: e.g. issue of shares / debentures etc.
    2. Advertising Services : avail the services of expert in advertising related work.
    3. Courier Services: with cheaper rates & safety.
    4. Customer Support Service: After sale service i.e. handling diverse complaints from their customers.

  3. Processes may be outsourced to a captive unit or a third party : 
    There are three types of third party service providers.
    1. Captive BPO unit : Provides service of a given kind to only one firm.
    2. Horizontals : Service provided to a wide base of clients, cutting across industries.
    3. Verticals : Specialize in one or two industries & scale up to doing a number of process from non-care of care.
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1. Outsourcing involves contracting.
2. Non core business activities are outsourced. :- take an example of a school, the school outsourced school buses from other company. It's a non core activity.
3.processes maybe outsource to a third party.
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