Outsourcing In Business

The term ‘outsourcing’ in dictionary is presented as a work or project or services that are obtained by contract from an outside supplier or third party.

 

Outsourcing is one of the most widely used business practice. If a company says it is outsourcing projects then it indicates that it is hiring professional(s) on contract (third-party), who may be an individual or another company having expertise in such projects. The requirement details would be provided to the third party who will employ the resource and tools necessary to accomplish the project given to them and deliver the end product in time. 

 

Why outsourcing is needed?

Outsourcing turns economical in case:

1. A company developing a project may not have expertise in dealing with certain area or parts of the project. So instead of hiring own professional experts company may outsource the project to a third-party who already have experience in delivering such work earlier with good track record.
2. In most of the cases, certain parts of the project can be developed more cost-effectively by other company. This is because they have complete tool set-up required for the project and experienced staff to who knows to use such tools best. So why a company would bother hiring a permanent staff for doing such things and thus increase burden on the company. Moreover if it is just a onetime requirement then hiring permanent staff may not be a good idea because once the project gets over those resources would be sitting idle and unutilized increasing financial overheads.

Pros of Outsourcing

In short, outsourcing has following advantages:

1. Lower cost of project development
2. Better efficiency
3. Better speed and time utilization.

Outsourcing Example

Suppose a company ‘TIH Fashions’ is expert in making fashion products and is a market leader having its outlet in various parts of country. Now it is looking to go online.

So it decides to hire a software development company ‘XYZ Softech’ to develop website application that will help it sell its product via online channel. After the development is over the same company would give application support as well.

 

This is the scenario where a fashion tycoon outsources the project of website application development for the company to a third party XYZ Softech’.

 

Outsourcing Companies

Few outsourcing companies are listed below:

• Tata Consultancy Services (TCS)
• Cognizant Technology Solutions (CTS)
• Genpact
• Wipro
• Infosys
• Mphasis