Outsourcing the transfer of traditional non-key functions of the organization (such as accounting or advertising for an industrial company) to external performers – outsourcers, subcontractors, highly qualified specialists of a third-party firm;
abandoning your own business process and purchasing services for the implementation of this business process from another, specialized organization. Variety of cooperation.
The main principle of outsourcing is “I leave to my company only what I do best, I give to an outside contractor what he does best. “
Outsourcing also answers the question of whether to buy from the market or to do everything you need to run your business effectively yourself, and there are three criteria that are decisive:
The cost of producing the product or service
The quality of the company’s products or (and) services
The owners’ strategic attitude toward the business.
The main criterion for outsourcing any business process or business function is, of course, the presence of a competitive environment. A monopolist is rarely customer-oriented and cares about providing a competitive price for its services.
The main results of outsourcing are cost reduction, respectively increasing business efficiency and the ability to free up a number of resources for the development of new areas or concentration on existing ones.
Production outsourcing is a type of outsourcing where an external entity may partially or completely transfer the business processes of production or a number of its components. For example, at some car assembly plants in Mexico, even the assembly line is staffed by the outsourcer company.
-reduction and complete cost control (usually the cost of the outsourcer company’s services is less than the cost of the client company itself to perform the same function)
-Saving on payroll taxes (no more use of your own staff)
-reduction of full-time staff
-freeing up internal resources of the customer to solve other problems
-concentration of the customer on its core business
-The use of specialized equipment, knowledge, technology of the company-outsourcer
-Minimization of own risks, active use of the competitive factor on the market when choosing a contractor
Disadvantages and risks of outsourcing:
– the quality of the outsourcing company’s services may be below the level required by the customer,
– Lack of leverage over the outsourcing company, with subsequent losses or additional costs, or loss of management time to resolve such problems
– Additional risks of losing confidential information due to the access of the outsourcing company’s staff to the customer company’s documents and information data
– The need to spend more time to resolve problems in urgent or emergency situations
– Outsourcing frequently does not work in the companies-customers, whose business processes have not been formalized or established.