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OUTSOURCING

CK Prahalad and Gary Hamel predicted, through their theory of core competence that companies should not try to be good at everything but should concentrate on their core competencies - the processes which are adding value to their shareholders and customers in order to build on the competitive advantage, leaving the rest to others who are best at doing that.

For example, Sony's core competence is miniaturization and Intel's core competency lies in chip design. Their competency does not lie in manufacturing or in processing payrolls. Similarly, a successful bank should be good at managing funds and need not be good at processing cheque book requests.

In today's world Outsourcing of non-core activities makes a lot of Business and Economic sense. Organisations are realizing that they cannot be all things to all people. As a result, they are focusing more on their core competences and relying on service providers to manage critical but non-core process for them. They have discovered that outsourcing discrete functions such as accounting and information technology is a highly effective strategy for controlling costs, improving focus and gaining access to capabilities not available internally. By outsourcing an organisation can enjoy various other benefits such as reducing capital expenditure; economizing on manpower and training costs; reducing operating costs; better speed and service; providing value added services at a minimal cost; increased customer satisfaction; avoiding the cost of new technology; etc.

Advantages of BPO

• Focus can remain on core business activities

• Competitiveness is enhanced

• Cost structure becomes variable

• Inside resources are freed for other purposes

• Operating expenses are reduced and controlled

• New ideas are acquired

• Investment in assets is lowered & Risk is reduced

• Advantage of the economies of scale and improved quality can be obtained

• Fosters innovation and conserves capital

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* Contributed by -
Shuchi Singla,
Global Business Operations, Semester-11,
Shri Ram College Of Commerce,
University Of Delhi.