Outsourcing is the transfer of organization on the basis of the contract of specific business processes or functions in the service of another company that specializes in the field. In contrast to the services of service and support with a one-time, occasional, random and limited the beginning and end, is usually transmitted by outsourcing functions to support professional trouble-free operation of individual systems and infrastructure through long-term contract (minimum 1 year). Availability of business process outsourcing is the hallmark of a variety of other forms of service delivery and customer care.
Advantages and Disadvantages of Outsourcing. Ethical Implications.
Increasingly in today's business world, a single line of the company focuses on a very narrow segments of the value chain, and other activities convey independent external suppliers, in other words, the transfer function in the outsourcing. It is very important to decide which aspects of the chain to leave valuables inside the company, and what - to transfer to counterparties.
Disintegration and outsourcing suggest rejection of the self-fulfillment of certain functions by transferring them to suppliers of goods and services and other partners. Transfer to outsource some functions of the company strategically expedient if:
- independent partners will fulfill them better and cheaper. Many computer manufacturers , for example, refused to final assembly , handing the job to counterparties , which gave them significant savings on the purchase of components and the organization of the assembly process . Cisco has transferred almost all of the production and assembly of routers and switching equipment partner company , which owns 37 factories , coordinated via the Internet;
- this type of activity is not a significant competitive and transfer to outsourcing does not threaten the core competencies , capabilities and know- how of the company . Widespread transmission in the outsourcing of maintenance of equipment , data processing, accounting and administrative functions of a number of subsidiary companies specializing in this activity;
- this reduces the risk associated with changes in technology and / or consumer preferences ;
- it increases organizational flexibility and speed of decision making, reduces development time and launch new products to market , reduces the cost of co-ordination,
- this allows the company to focus on its core business .
You can learn or retain key activities , while avoiding the disadvantages of vertical integration should choose a strategy of long-term partnerships with key suppliers and thus obtain access to their competencies. Previously, many companies are trying not to work too closely with suppliers and issued them , mostly short-term contracts . Although the company worked with suppliers for a long time , the recent feared that cooperation may at any time stop, usually at the conclusion of the contract the determining factor was the price , and the company tried to get the most favorable supply conditions in exchange for long-term cooperation . The threat to move to another provider was a serious weapon , and that it acts more strongly , instead of practicing the conclusion of long-term contracts with numerous suppliers of short-term , creating fierce competition among the latter . Today there is almost universal rejection of this strategy in favor of long-term alliances and partnerships with a few high-performance suppliers . In place of short-term contracts concluded exclusively due to low prices, come a long partnerships .
Dell Computer, thanks to a partnership with suppliers and organizing deliveries on time, contains a supply of parts for only seven days, the contents of abandoned storage facilities and offers computers with new accessories in a week after the start of deliveries of the latter. Cisco has organized so working closely with its suppliers that they ship equipment Cisco Cisco directly to consumers without any participation of employees was Cisco. It costs the company each year 500-800 million dollars cheaper than purchasing their own businesses. Hewlett-Packard, IBM, Silicon Graphics (now SGI) and other companies have sold a part of their factories and suppliers signed contracts for the purchase of the products of these plants. Starbucks buys coffee beans from independent suppliers and believes that it is more profitable than integration "back."
Prerequisites for Outsourcing
Some activities are too costly or burdensome, if they perform by the company , for example, if they require extensive training or the availability of certain tangible and intangible assets , in particular the special corporate culture , motivation, high level of confidence of buyers and suppliers . All this can not be acquired overnight, but you can only get with the times and through persistent efforts.
Absorption company with the necessary capabilities to be the most obvious solution to the problem of missing resources or functions, but it can be difficult legal issues, the problems of reorganization and irreversible consequences in case of failure. It is extremely rare complete set of scarce resources and capabilities concentrated in one unit of the absorbed company, often they are scattered all or several units , besides, they can not be purchased separately from other resources. Alliance or partnership more effective in this situation. Acquisition by another company in a rapidly changing market does not provide the required flexibility and strategic alliance can be terminated in the event of an unforeseen change in the situation.
Transfer of external partners of functions of one or more parts of the value chain has a number of strategic advantages:
- allows you to get parts or service higher quality and / or less expensive;
- improves the innovative capabilities of the company due to the interaction and partnership with world-class suppliers, who have great intellectual capacity and rich experience in innovation;
- provides greater flexibility in the event of a sudden change in market conditions or consumer preferences: it is easier and cheaper to find new suppliers with the necessary capabilities and resources than to rebuild the internal operations of the company, eliminating one of power and resources and creating new ones;
- accelerates the acquisition of resources and skills;
- allows you to focus on those operations that are carried out effectively by the company, and those that are strategically wise to keep it under control.
Outsourcing provides significant advantages when narrowing business.
The company runs the risk moved outside its limits too many activities and loses part of their own resources and capabilities. In such cases, the company will lose its activities, which for a long time ensured its success in the market. Cisco, for example, monitors and protects your unique manufacturing expertise by developing new production methods that are required to use contractors working with her. Thus, Cisco, on the one hand, constantly improving the production, on the other - stores secret codes and original design of their products. Additionally, Cisco using the Internet around the clock tracks the manufacturing operations of its contractors, wherever they are, and take action immediately when problems occur.