Runninghead: OUTSOURCING

Outsourcing

Outsourcing

Introduction

Outsourcing can be regarded as subcontracting a business process to a third-party company. The ease that outsourcing provides to firms have enabled firms to move entire business functions to external service providers. Outsourcing can considerably increase the efficiency of a company and give it the ability to attract almost any staff to implement a wide range of services necessary for the business during that time. Outsourcing is a practice, which is being carried out by large companies. The purpose of ??outsourcing is to decrease the cost of the processes significantly, as the company performs that task through external sources (Blinder, 2006, pp. 78-91).

It is particularly important that goals and deliverables be clearly outlined to avoid confusion. Third, the company must ask the outsourced company about the past projects that they have done. This will help the company to get an idea about the working attitude that is being outsourced. At first, company should start with small projects and see from there. These tips should be kept in mind when hiring an outsourcing company (Blinder, 2006, pp. 78-91). A company avails outsourcing in order to make its business more successful. Therefore, choosing an appropriate outsourcing company is the first step towards success.

The dramatic changes in the economy led to a worldwide increase in international trade. This shifted the focus of researchers from domestic to international outsourcing. These researches identified the distinctive character of the current phase of economic globalization as an international fragmentation of production (Bettis, Bradley, Hamel, 1992, pp. 7-21). The international fragmentation of production involves a process that is spread across the production sites in various countries. Outsourcing and intra-firm trade within large corporations are the mechanisms which allow such fragmentation. International outsourcing is a qualitatively new phenomenon because the earlier phases of globalization mostly involve trade of finished products.

Types of Outsourcing

The outsourcing market is expected to expand in the coming years. As many companies are becoming conscious of the potential advantages of outsourcing. This is due to the experience of the companies in outsourcing, which makes them aware of the risks and potentials (Bettis, Bradley, Hamel, 1992, pp. 7-21). Although there are few disadvantages such as non-loyalty and other stakes of the outsourcing companies, the advantages are far greater than this. For instance, outsourcing is directly linked to the notion of foreign direct investment (FDI). Almost as FDI, outsourcing involves investing in another country but in somewhat dissimilar way. The major dissimilarity between the outsourcing and FDI concept is that, through FDI the home company try to sell the goods in the foreign market, as compared to that in outsourcing, services and goods are brought back to be sold or implemented in the company's home facilities. There are two main forms of outsourcing:

Initially there is Long-term outsourcing which is characterized by a long-term partnership between the outsourcing organisation and the outsourcing provider (e.g., a strategic alliance or network). It involves an intensive interaction, open communication, and the sharing of risks and ...