Different Types of Outsourcing

Introduction:

Outsourcing is the process by which an organization contracts with another individual or company to get some of its work done. Viewed this way, most organizations go for some kind or other of outsourcing. Generally it is non-core aspects of the business that are outsourced.

The firms that offer the services thus required are called service providers or third-party providers. Businesses may thus tie up with service providers for either individual processes or whole projects or operations.

"The Industrial Revolution brought us specialization, which in time brought us Outsourcing and changed the way companies did business."

With more and more types of Outsourcing services arising, Outsourcing in general has continued to grow in popularity as companies look to reduce business costs while improving performance.

Professional Outsourcing

Professional Outsourcing includes accounting, legal, purchasing, information technology (IT), IT or administrative support and other specialized services. This is the most common area for these specific types of Outsourcing services, as there is a potentially high cost savings associated with this type of arrangement. The company pays only for services actually provided while having access to high quality resources, which significantly reduces overhead costs.

IT Outsourcing IT outsourcing, a type of

professional Outsourcing, is one of the more common services outsourced today. It refers to the practice of seeking technology related resources or subcontracting outside of an organization for all or part of an informational technology function. Companies use IT outsourcing for functions ranging from infrastructure to software development, maintenance and support.

Multisourcing

Multisourcing is another important term and provision of IT outsourcing worth exploring more. Multisourcing is a term that can apply to any business area, but is most commonly used when referring to IT outsourcing and IT services, as it is the blending of business and IT services from the main set of internal and external providers in the pursuit of business goals. It was first introduced by a market technology research firm in 2005 and is most frequently used by large enterprises, where IT operations and technology infrastructure are contracted to multiple vendors. 

Manufacturer Outsourcing

Manufacturer Outsourcing is another common Outsourcing service today

that companies involving the production of goods should understand when asking What is outsourcing, what are the types and why outsource these services anyway? Manufacturer Outsourcing services are usually quite industry specific. An automobile manufacturer for example, can have an Outsourcing arrangement for building and installing windows in all their models. Such outsourcing arrangements can result in Significant cost savings and reduced assembly time. 

Project Outsourcing

Sometimes companies have trouble managing One of their projects or even just completing a portion of a specific project. In such a case, companies can project outsource. There are individuals and specialized units that specialize in project management that companies can outsource to. These Outsourcing services can be contracted to either manage entire projects or complete portions of projects. There may be a number of reasons why companies would want to outsource such a function,especially because there are many benefits of outsourcing parts ofprojects, but project outsourcing most often occurs because companies simply do not have enough available people in house or enough skills, or funds to do it on their own.

Offshore Outsourcing

The practice of offshoring means having the outsourced business functions done in another country. This type of Outsourcing grew in popularity before nearshoring and reshoring did. Work is often offshored in order to reduce labor expenses. Sometimes outsourcing is used as a strategic way to enter new markets and tap talent unavailable domestically or as an attempt to overcome current regulations within the home country that prohibit certain activities. India, Indonesia and China have emerged as dominant countries for Outsourcing offshore. A major reason why offshoring became possible and quite appealing to U.S. industries was due to the global ubiquity of the Internet and massive telecommunications capacity in the 90s and on.

Reshoring

In the recent past, companies thought sending manufacturing jobs from the US to areas like China and India were low-cost, and a no-brainer Outsourcing move. However, now many of these manufacturers are beginning to realize that offshoring production services to countries like China and India may not be as cost-effective. As companies asked the question - What is outsourcing, more and more, this realization led US-based companies to start bringing their offshore manufacturing capacity and jobs back home. This process is referred to as reshoring. It can be summed up as the reversal of Outsourcing or the transfer of a business operation back to its home country. There are some benefits to reshoring, such as the rising cost of oil, which has impacted shipping costs is not a problem with reshoring. 

Nearshoring

A recent and rapidly growing Outsourcing trend is the process of nearshoring . Rather thanreshore services back to the US, companies have begun to move business functions to a country geographically closer with a closer time zone or economic structure to the company's home country. This is a means of cutting costs and improving services. Basically, nearshoring combines the benefits of outsourcing offshore and the benefits of reshoring to create a strategy that cuts costs and improves services (only two of the many benefits of outsourcing, as stated).