Outsourcing As A Way Of Cutting Down Costs

The term outsourcing has been heavily used over the past few years

, but oftentimes the meaning of this process wrongfully understood. If we were to give it a dictionary definition, outsourcing would be the process of an organization or individual transferring the ownership of a business process to a supplier (which in turn can be an organization or individual). Some would argue that this is a simple business relationship, but with outsourcing theres a catch. The difference between a simple business relationship and outsourcing is the way the control over the business process is handled and transferred. In the first case, the buyer retains full control over the entire process and simply tells the supplier what to do, with details nailed down to the point. With outsourcing however, the buyer rarely instructs the supplier on HOW to do the work. Basically, the buyer will simply tell the supplier WHAT he needs and give him a set of general guidelines, but its left to the suppliers creativity to get the job done.

Of course, outsourcing is a double-edged sword for both buyers and suppliers. From the buyers perspective, the benefits of outsourcing are the reduced involvement in the project, which allows for more spare time focused in a different direction. You dont have to keep a constant eye on the suppliers work, simply because youre more interested in the final outcome than on how they handle things. On the other hand, the end result might not be satisfactory, which creates a sort of deadlock situation. On one hand, the supplier might argue that thats what you asked for and that you did not provide them with conclusive information.

From the suppliers point of view, outsourcing can be both a pain and a boon. On the bright side, you have almost full control over the project and you can choose your own ways to get it done. However, you risk not hitting the points that the buyer aims for, especially if his communication skills are not very high.

Outsourcing is a bigger business branch, containing several smaller ones such as offshore outsourcing, crowdsourcing and freelancing. Offshore outsourcing is mainly a term used by US-based businesses, describing the outsourcing of projects in Europe or Asia. The projects are sent over to companies in countries that are less developed, offering a cheaper work force at equal quality. The IT market for example is constantly being offshore outsourced in India, Romania or Ukraine as well as several other countries.

Crowdsourcing is a clever business technique that relies on enthusiasts to do the job done. For example, electronic freelancers, photo enthusiasts, amateur writers are all examples of crowdsourcing. Their work is bought of very cheap and oftentimes free and then used in a business. Crowdsourcing is considered slightly unethical by some, since the buyer will profit from someones work without having to pay for it, however in most cases, the suppliers will be glad to see their work being used, their photos being published and their articles appearing on websites or in magazines.

Besides these methods, there are several other ones related to outsourcing, including homecoming, accounting outsourcing, supply chain outsourcing, vertical integration and so forth.

by: Malvin Ryan

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