Outsourcing is a process whereby a third-party company is hired to do some work for an organization and work that would have otherwise been done within. It is a strategic decision that engages the management in weighing between the likely costs and loss of service or product control. Over the decade, outsourcing has increasingly become a choice for most business enterprises. As a result, it has created business opportunities for many entrepreneurs and organizations. It is worth noting that the trend has led to a specialization in service delivery and hence more productivity. Organizations that have employed outsourcing as a way of accomplishing some of their tasks stand to benefit immensely (Claire, 2008; Kern & Willcocks, 2002) in terms of time and risks associated with the development of products and external regulations, as well as access to technology, greater information standardization, and creation of employment opportunities.
The forces behind outsourcing have led to its growth. The increased cost of production, as well as developmental costs, is among these forces. Organizations have noted the value of outsourcing, which includes cost-effectiveness. In this case, organizations have realized the lack of matching returns from huge investments in processes and operations that especially require specializations. A case in point is in pharmaceutical companies where the development of commercial drugs costs too much in respect to their returns (Claire, 2008). Outsourcing, therefore, has come in as a highly preferable approach in these scenarios, especially in providing efficiency and expertise in areas such as litigation.
Outsourcing to companies specializing in particular services is vital for organizations. Time, clarity, and risks are some of the factors that determine the success of a company’s management, operations as well as overall performance of a company. Noting that it provides clarity in the decision-making process and minimizes both risks and time in the development of products, it is substantial to link outsourcing with the success of organizations (Kern & Willcocks, 2002). Furthermore, outsourcing enables the firm to get insights into issues associated with product design and development more quickly. This accelerated insight is useful in avoiding delays and late accomplishment of tasks and objectives.
With globalization and governments’ continued introduction of regulatory measures, commercial organizations are continually at risk. Therefore, sharing responsibilities such as operations and financial management with outsourcing companies allows for increased efficiency in the management of these risks. Additionally, organizations benefit from improved planning of internal resources, thereby allowing them to concentrate on developing formulations that are most likely to get to the market quickly and effectively.
Strategic outsourcing has brought value to organizations’ supply chains on top of those benefits resulting from the cost economies. Strategic outsourcing refers to arrangements emerging when organizations “depend on intermediate markets” in the provision of specialized services that add to existing ones (Holcomb & Hitt, 2007). In value chains, for instance, these intermediate markets come up as a result of various industry conditions differentiating productions. Therefore, due to greater standardization of information, distinct demarcation in administration emerges in a value chain and ultimately results in ease of activities transfer.
Outsourcing gives the advantage of access to advanced technology that would otherwise be expensive if organizations adopted the technology singly. Therefore, enhanced efficiency, which would in turn result to cost reductions and increased production, is guaranteed. Note that, in addition, the time the products arrive at the market is reduced. Outsourcing is also viable in allowing the organization to focus on areas where they are highly competitive as well as on their core activities that define their businesses.
Outsourcing has created a whole lot of opportunities in several economies. It is an industry that is growing rapidly, and with organizations embracing this idea, nations are going to benefit in terms of more employment opportunities. It is arguable that outsourcing has a double-effect whereby companies seeking outsourced services will proportionately reduce the number of human resources required, while the companies offering these outsourced services will provide employment opportunities. In contrast to this view, it is also arguable that the overall outcome in regard to employment is that more opportunities emerge with the development of the outsourcing industry (Business Week, 2006). Claire (2008) notices that,
During the past two decades, outsourcing has become increasingly prevalent as the way to gain a competitive advantage. This trend has led to a significant increase in the number of services and functions available for outsourcing, and there are emerging opportunities for niche outsourcing to contractors that provide specialized sets of tools and access to cutting-edge technology.
In conclusion, outsourcing offers solutions to challenging issues that have come up with globalization. These challenges have compelled the organization to seek external assistance from specialized firms besides the use of internal resources and expertise. Consequently, this has led to the growth of the contracting industry that is characterized by specialized service providers. These specialized firms’ competency has the potential to turn various risks into tangible benefits for various organizations that takes advantage of outsourcing.
References
Business Week. 2006. The future of outsourcing, Business Week. Web.
Claire, M. S. (2008): Outsourcing still the way forward: companies utilizing competent contract research organizations will reap tremendous rewards and benefits, Pharmaceutical Technology Europe. Web.
Holcomb, T.R. & Hitt, M.A. (2007): Toward a model of strategic outsourcing. Journal of Operations Management, Vol 25, No. 2, 464 – 481.
Kern, T. & Willcocks, L. P. (2002): The Relationship Advantage, UK: Oxford University Press.