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EDUindex News

OUTSOURCING

A trend that has increasingly gained a lot attention and became popular is outsourcing. The plan of outsourcing originated from the theory of core competence by the C.K. Prahlad. According to this ideology, the business must identify its core functions and competence and should be focusing on them only. This will give them the success rate that they need. As for the non-core activities, it should be handled by some other outside agencies or organisations.

In other words, outsourcing is the contracting out of the non-core activities and work to other agencies who are specialized in those areas. The aim is to benefit from their expertise and also put all of their focus on their main activity.

Let us take an example. The company ABC Ltd., whose main activity is to deal in electronic products, wants to advertise some other brand of cosmetics launched by them. For this, they will have to divide their focus between working with the electronic products and advertising the new one. Instead of doing that, they can hire an agency who is specialized in advertising, let’s say XYZ advertising LTD., and they will do that work for them. This helped ABC to advertise their new brand without compromising with management of the older one.

Here is a list of benefits of the outsourcing process.

 

1.FOCUS ON CORE FUNTIONS

As discussed above, it becomes easier to focus on your own core functions and activities if the side activities are given to someone else to complete. By this, better utilization of human as well as physical resources is done.

 

2.SPECIALIZATION

It is possible that if you do these non-core activities on your own them you might not ace it considering it is not your forte. Contracting it out to someone who is specialized in that gives you the benefit of their expertise. It guarantees you that those professionals will do a brilliant job at it since it is their specialty.

 

3.REDUCES COST

Since, the outsource agency are a master of what they have been told to do, they will charge less for their services considering they are providing the same services to a number of other companies. This will save up the cost of your company since if you do it on your own then you might end up using a lot of extra money as you are not aware of that particular area yet.

 

4.GROWTH

Outsourcing is a collaborative learning process. Both the companies involved gets to know more about each others field. Because of this, companies these days are not only outsourcing their non-core or even core activities but also seeking the benefit of knowledge from other agencies like Research and Development.

 

5.ECONOMIC DEVELOPMENT

Outsourcing not only helps the companies with its activities but also creates more employment opportunities and entrepreneurship. Because of this, a lot of IT sector has shown a tremendous growth in its employment and entrepreneurship. Not just this, but it also increases the exports in the host countries, countries from where the outsourcing is done.