Customer support services like call centers and other IT companies, which develop and design websites, have been strongly established in different parts of the world. This was in consequence of the abrupt and devastating financial downturn experienced by economic leviathans like the United States and Europe. It was only at the turn of the millennium when the importance of outsourcing was intensely felt. However, their existence has already been known as early as pre-1990.

Defining Outsourcing

Outsourcing is the contracting of a company of another company to relieve them of excess responsibilities and provide their employees other roles and functions that directly affect core activities. It is helpful in cases wherein the contracting company is not able to render their usual services because of limited manpower or resources.

One common example of a company activity that is outsourced is voice customer support. And it is the reason behind the abundance of CALL CENTERS and call center agents around the world. In call centers, employees usually give product/service support and information to the callers.

In another sense, outsourcing also denotes delegating specific jobs to experts instead of having the same group of people perform all the tasks at one time. It is a form of division of labor that helps companies define the roles of their staff. For instance, in an IT company where there are computer programmers, there is a tendency for customer service functions to interfere with programming. As a result both tasks are not efficiently handled. So, to handle them both, the company may need to outsource the previous work to a call-center that specializes in such area and let their programmers do what they do best.

Identifying the Kinds of Outsourcing

• Nearshore outsourcing – This is the term used in sourcing company processes to another country with a much lower pay rate, but that is at a relatively close distance to the contracting business; an example of which is the United States to Mexico.

• Offshore outsourcing – Opposite to nearshore, this term is a designation of the practice of getting external help, from a specializing company in another country that provides high quality, low cost services but is located far from the contracting company. This is the transaction that commonly occurs between the United States and the Philippines.

Offshore Outsourcing Dissected

Now, offshore outsourcing has different types, depending on the nature of the work outsourced. One is the most common Business Process Outsourcing (BPO), second is the Knowledge Process Outsourcing (KPO), the third is the Information Technology Outsourcing, and lastly, the Software R&D; (Offshore Software Development)

• Business Process Outsourcing (BPO) – With this kind, a specific task is outsourced. This may refer both to back office outsourcing, because this includes internal business functions such as the human resources and the finance and accounting, and front office outsourcing which is the customer-related services like contact centers.

• Knowledge Process Outsourcing (KPO) – In this outsourcing, knowledge-related works are carried out by workers in a separate company. This typically involves high-value tasks made by a very skilled worker usually related to researches. Its services include investment research services, market research services, legal research services, and patent research services. Also, this outsourcing usually covers on investments and reading X-rays.

• Information Technology Outsourcing – This is the outsourcing of computer programmers to the company. The reasons for availing this kind of outsourcing are the lack of resources and cost reduction.

• Software R&D; – The term “offshore software development” may also be used interchangeably with it. And this is mainly focused on software development services by an out-of-the-country supplier. The main reason for this outsourcing is the higher development cost of the local service providers.

Outsourcing Advantage and Disadvantages

Like all other things, it is inevitable that outsourcing also has its advantages and disadvantages no matter how effective it is. The following are the advantages of outsourcing:

1. Concentration on core business areas– Employees can focus more on their core competencies since their back office/front office tasks are outsourced to third party companies.

2. World-class technology at lower rates – Innovating your company is so costly, risky, and difficult to keep up with. Outsourcing to companies which have the resources and expertise to update your technologies is indeed a great advantage of outsourcing.

3. Skilled manpower at affordable prices – The company gets a skilled manpower at a very low rate which, in turn, leads to an increase in productivity and cost savings.

4. Increased productivity – This would increase the companies profit and productivity because they can employ and maintain skilled manpower in large quantities at low costs.

5. Tax Benefits – The company can save up on taxes because outsourcing countries usually have low demands and high incentives for investors.

Given this, it is clear that outsourcing is definitely a highly beneficial and advantageous venture for companies. However, it also has its drawbacks and disadvantages. They are the following:

1. Outsourcing often eliminates direct communication between a company and its clients. This prevents a company from building solid relationships with their customers, and often leads to dissatisfaction on one or both sides.

2. There is also the risk of not being able to control some aspects of the company, as outsourcing may lead to delayed communications and project implementation. Any sensitive information is more vulnerable, and a company may become very dependent upon it’s outsource providers, which could lead to problems should the outsource provider back out on their contract suddenly.

Because of the negative effects of outsourcing that are mentioned above, it is really important that each company critically assess their needs to determine whether outsourcing is necessary or not. This way, they do not waste their money in pointless investments.