Outsourcing – Definition & Examples

Corporate needs to manage their resources to the best possible way, to get highest benefits possible.

This means considering business costs , assets available and liabilities the corporate would occur, and manage human teams as well.

But sometimes, to have some asset ( or a resource ) managed through an outside party ( external corporate or vendor ) would become cheaper and/or more efficient from managing it directly, from inside the company.

Corporates move to outsourcing when it is operating in many markets, and to better serve a certain market would hire a specialized corporate in that market to handle certain tasks , like warehousing or Call Center or even Finance Department or so on.

Corporates, also, may consider outsourcing some of its operational tasks when they can utilize certain tasks to an outside corporate , which is more specialized in handling this tasks than the original job owner.

We will talk in examples to better understand what is meant by outsourcing !!

Consider Apple , it is a gigantic corporate specializing in developing state-of-the-art technologies in certain fields, but they don’t want to waste precious resources on manufacturing – with all the hassles of manufacturing and factories , so they “outsourced” their mobiles manufacturing to a Taiwanese company named “Hon Hai Technology Group – Foxconn ” . Apple designs the mobile in details, Foxconn builds it following Apple’s standards and quality requirements , and quantities .

Foxconn, for example, builds other products that iphones ( despite they have exclusive production lines for the leading phone ) , such as Electrical cars, Sharp monitors , and others – see their web site for more info.

So, which business tasks are most outsourced ?

Outsourcing can be done for any department or task in the corporate; some corporates outsource a certain project ( that is called project outsourcing ) – where the corporate handles certain missions to another company and wait to get the results required. That is mainly famous in Creative businesses ( media agencies, market studies companies, dispatching new furniture in a new building or so , and examples add on..

“IT Affairs OUTSOURCING” is a famous outsourcing module in the current business environment is; yes it is !!

Corporates may outsource their IT issues to a more specialized company, to manage their network , build the infra structures required, build an app for them, or manage their servers or so.. You , basically, give a more specialized corporate the headaches of managing your network and maintaining it, they serve your business and others too, and would consider the latest techniques to save their reputation and businesses too , and you will pay for what you get only – as you don’t need the IT resources and staff everyday .

“Accounting & Finance” is another sector of business which is widely outsourced in the current environment.

A corporate, big or small, can outsource the payroll works, taxes management and make the budgets . It is easier, and more controllable , procedure to outsource the accounts department.Microsoft NZ

“Manufacturing” is another famous business part to be outsourced. This is especially done in the parcels companies, to build / lease factories in far-away countries where labor costs & raw materials costs are cheaper than in the original country. Major brand names have exclusive production lines solely producing them in Vietnam, China, India , Bangladesh and others.

Reading this matter, a note from InTouch studies site indicates that “… of 348 garment importers surveyed on InTouch’s website since in 2016 -61 percent said they source garments from at least one of these countries. China is still the most popular choice for garment importers at 21 percent. But Bangladesh and India tie for second place at 14 percent, while Vietnam comes in right behind at 12 percent..”

Top 10 corporates that outsource jobs

The top 10 corporates ( with a total of 170,000 jobs in approximate – 2018 figures ) , which outsource jobs to other companies are ( based on Techsunite.org studies site ) :

  • IBM
  • EDS
  • Dell
  • Cognizant
  • Siemens AG
  • General Electric
  • Convergys
  • Accenture
  • Computer Sciences Corp
  • Intel

Stacy Adams

The risks of outsourcing

But to tell as well, outsourcing isn’t a green field for corporates to gain profits without problems !! Outsourcing has major negative impacts on the corporate’s business , in summary they are :

–         Employees Morals are affected

–         Loss of control

–         Quality issues

–         Customer losing

–         Security fears and issues

Let’s detail these points a little bit more:

* Employees morals are affected … They will feel threatened, since their colleagues’ jobs , or theirs, would be done by an outside company , and they would be laid off !!

* Loss of Control : The company doesn’t have control over the outsourced job as if it is done indoors. There should be extensive and close guidance and control procedures on the outsourced company . This loss of control opens the gates for the coming points

* Quality Issues: This is a major issue when corporates look for cheaper labour costs and cheaper materials , from the job owner side or the outsourcing company; especially when hiring lower-educated staff , or low-quality products that would result in an un-required end product.

* Customer Losing: When there is a lack of control with the outsourced company, and quality of the staff & the end products aren’t as expected .. The end customer will not return to this company and buy its product or service again, like a customer call center speaking in an unclear accent or even language, or the IT support doesn’t understand his duties well , customers would be frustrated and go for another vendor.

* Security fears and issues; This is important when the outsourced matter has classified information and/or tasks, like a new medicine developing, or developing a demo new racing car, or a weapon or a Military device, etc…


Should corporates outsource then ?

Well, corporate have to study their options very well , and not to think of saving extra dollars here or there only – but to think of the end-result expected, the partner ( outsourcing company ) and its abilities to handle the outsourced project expected .

Corporates need to study their targeted customer and markets segments, can it approach it directly? Or should it outsource some tasks for another company ? Should it outsource certain tasks for some time till it learns the most suitable techniques , so let’s source the business for a while?

What are the control and follow up techniques and procedures that would be taken to insure the requested results are achieved, in the way originally planned for? And

Many factors are there, and corporates should think well before outsourcing any of their business modules.Microsoft NZ


Enjoy this blog? Please spread the word :)