The global financial system and businesses are forever and ever developing, with highly evolved technology in hand. Inventing new paperwork and techniques of process arrangement. As a result, a brand new approach to doing business has emerged. It is known as strategic outsourcing.
Strategic outsourcing is a goal-oriented business relationship between an organization and another company that provides services for the organization. It’s a way to reduce costs while increasing efficiency.
A Brief History of Strategic Outsourcing
The strategic outsourcing strategy is thought to have originated in the US. Alfred Sloan served as the company’s CEO during the 1920s. He had to take market share away from Henry Ford’s company, the main rival.
Sloan made the initial decision to split up business operations into primary and secondary ones. He discovered that by delegating ancillary tasks to the contractor, costs could be sharply reduced while business operations could be improved. Outsourcing refers to the transfer of a company’s non-profit duties to a third party with expertise in a particular sector.
The fierce competition between these two automotive giants has demonstrated that it’s hard for companies to be self-sufficient and highly competitive at the same time.
In 1989, outsourcing was officially recognized as a business strategy for the first time. In the beginning services such as security, cleaning, catering, etc were outsourced. But in the coming years, strategic outsourcing got a boost to development energized by the global financial crisis new ways and types of outsourcing have emerged and become progressively important.
There Are 3 Types Of Strategic Outsourcing
Production, Process, and IT. Production outsourcing is taking a product idea from the shelf and having a third-party product for your organization to sell it. Process outsourcing is taking internal business processes off the shelf to external contractors. IT-Outsourcing is taking the IT functions off the shelf and letting a professional IT service provider deal with them. Let’s dive deep into these 3 types of outsourcing
Production-Outsourcing:
Production is typically outsourced by big companies that have large production cycles and product demand. Usually, it makes no sense to produce every aspect of an end product with its own capacity. For instance, Cell phone production is a very complex process and various parts need to be produced and assembled together to bring a product to life. If you’re into android phones you must have heard the name snapdragon, it’s a chipset for your phone, then may notice not only one but various companies’ mobile phone companies use snapdragon as the processor for their phone. This is a perfect example of production outsourcing as snapdragon processors are produced by the company named Qualcomm and they’re well versed at producing top-notch processors and big mobile companies simply buy their processors to use as a part of the phone that they produce.
Process-Outsourcing
Process-Outsourcing refers to transferring an internal business process to an external service provider. This type of outsourcing deals with a huge level of processes such as accounting, marketing research, financial management, etc.
IT-Outsourcing
IT-Outsourcing is basically outsourcing companies IT functions such as equipment maintenance, creating network infrastructure, software development, etc. Services from certified professional IT specialist is not cheap and most companies don’t even have enough works to have a full-time IT specialist on board. So it just makes sense to outsource.
