Explain the features of outsourcing.

 

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.