Outsourcing refers to a long-term contracting out generally the non-core and of sometimes even some of the core activities to third party specialists with a view to benefitting from their experience, expertise, efficiency and investment. It has become a necessity to keep businesses afloat and to stay competitive.
Benefits of Outsourcing are :
(a) Focusing on key functions: Outsourcing helps business in focusing on areas it has core competence and contracting out rest of the activities. This way a business can make better use of its human, physical and financial resources.
(b) Quest for excellence / benefits of specialization: By outsourcing, a company specializes in its area of core competence and also gets benefits from the experience, expertise and efficiency of third party specialists.
(c) Cost reduction: The outsourced firm can perform the same job at a lower cost (due to the economies of large scale by providing services to a number of organizations).
(d) Growth through Alliance: The firm need not invest money in creating and maintaining systems for routine and non-core activities. Besides, if it holds a stake in the outsourcing firm, it gets a share from the profits earned by the outsourcing firm. There is also inter organizational knowledge sharing.
(e) Economic growth and development: Outsourcing, stimulates entrepreneurship, employment and exports in the host countries,which are the countries from where outsourcing is done, such as India.
