Outsourcing

The information highway has altered the way businesses function and today organizations are competing at a global level. We are witnessing the rapid growth of what are known as 'virtual organizations' where partnering and outsourcing are the trend. Outsourcing is a tool for companies to optimize their performance and maximize their profitability by allotting nonspecific functions or non-core areas of their business to respective domain experts. Thus outsourcing provides organizations the opportunity to concentrate on their core areas or the areas of expertise and helps them streamline their operations. Outsourcing is not a totally new concept as companies have all along been outsourcing their training operations, clerical works, shipping and forwarding operations, etc. However the surge in information technology has bought a paradigm shift in the way organizations operate and outsourcing has emerged as a new business model. [Fred Luthans]

Today, outsourcing is considered a strategic measure and most organizations outsource their IT enabled services and BPO operations to reduce their cost and increase the efficiency of the business operations. Many organizations outsource their back office services not only with an economic viewpoint but also to enable them to focus better on the key areas of their business. Outsourcing any area of their operation to a partner who has the domain expertise helps organizations have better leverage over their business functions resulting in better business outcomes. From the consumer perspective also outsourcing is a welcome trend as it provides them economical services. Outsourcing not only gives organizations the flexibility in their business planning but also by harnessing the power of cooperation outsourcing gives them a strategic advantage in deriving maximum benefits from the existing market opportunities. Decreasing costs, improving throughput, strategic flexibility and overall optimization of core organizational functions are some of the reasons why organizations outsource part of their business functions. [Federal Reserve Bank of Dallas]

1) Fred Luthans, "Organizational Behavior," McGraw-Hill International Edition, 8th

Edition, pg 541

2) Federal Reserve Bank of Dallas, "Beyond the Border: Do What You Do Best,

Outsource the Rest?" Accessed on Oct 28th 2004, http://www.dallasfed.org/research/swe/2003/swe0306c.html