Outsourcing is becoming a common development between specific industries and services. Outsourcing can be defined as subcontracting a service to a third party company to provide a service that could otherwise be performed by in-house workers. In a nutshell, outsourcing refers to the transfer of a business function or service to an outside service provider.
Many large and medium-sized companies are getting more and more involved in outsourcing as the years go by. An example of jobs that are outsourced are call centers that offer services such as technical support, credit cards, medical transcriptions, and even bill payments. These third party companies handle different jobs or offer the same service but cater to a wide range of clients. Most of these jobs are located abroad or offshore and are usually located in developing countries.
Only recently has outsourcing been used for a large number of specialized services, but outsourcing itself has been around for a long time. Specific specialized services, such as company payroll, billing, and data entry, are outsourced so that these services are performed more efficiently. Specializing in a specific process not only makes the service more efficient, it also makes it more profitable. Lower operating costs and specialized services are some of the main reasons foreign companies turn to outsourcing.
Companies have many reasons to outsource their services to other countries, but one of the main reasons they do so is because it saves a lot of time and money, which is perhaps the most important aspect of all. One of the reasons companies want to outsource to developing countries is because payroll and benefits are not that expensive compared to the main location.
The minimum wage for an employee in the Philippines is nowhere near the minimum wage that an employee should be paid in the United States. Benefits like health care, bonuses, and salary costs are much lower if you outsource to developing countries than if you get them at the company’s original location.
Information technology outsourcing and business process outsourcing are perhaps the two most popular types of the various forms of outsourcing. Outsourced information technology services often mean the transfer of labor related to computers and the Internet.
On the other hand, business process outsourcing involves call center outsourcing, human resource outsourcing, investment and accounting outsourcing, and claims processing outsourcing. IBM and Accenture are just a few of the larger companies involved in business process outsourcing.
Outsourcing also has its drawbacks, like many other business models. One of the disadvantages is the breaking of the direct ties between the company and its client. Services such as customer service is one of the highest priorities in outsourced services today. Another drawback of outsourcing is the loss of jobs in developed countries because jobs and opportunities are disappearing abroad.