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 :
- Outsourcing involves contracting out :
e.g. activities like sanitation, (cleanliness) outside agencies on contractual basis.
- Generally non-core business activities are outsourced :
- Financial Services: e.g. issue of shares / debentures etc.
- Advertising Services : avail the services of expert in advertising related work.
- Courier Services: with cheaper rates & safety.
- Customer Support Service: After sale service i.e. handling diverse complaints from their customers.
- Processes may be outsourced to a captive unit or a third party :
There are three types of third party service providers.
- Captive BPO unit : Provides service of a given kind to only one firm.
- Horizontals : Service provided to a wide base of clients, cutting across industries.
- Verticals : Specialize in one or two industries & scale up to doing a number of process from non-care of care.