By categorizing operations/processes into core activities and non-core activities, organizations can differentiate the areas where they should focus to attain competitive edge. Increased focus in core business operations and developing competitive advantage has left companies wondering what to do with their non-core, supporting services such as accounting and HR, credit card processing, data entry, document conversion, and product testing. Although these operations have a role to play in improving the core activities, they can’t contribute much in terms of revenue and bottom line. It is practical to outsource these activities to a third party to achieve increased returns and improve productivity.
Today, the trend of offshore outsourcing is increasing at a rapid rate. In offshore outsourcing an external organization is hired to perform some business tasks within a country other than the countries where the products are actually produced. As per a global report on offshore outsourcing published last year, the overall number of U.S. jobs outsourced offshore during 2013 is 2,637,239. Moreover, 36% of the firms across the world are depending on offshore outsourcing. 26% of the CFOs favored India as the popular destination for outsourcing whereas another 18% favored China for the same.
Some Statistics in Offshore Outsourcing
There are some reasons that provoke firms to go for offshore outsourcing. Improved quality, faster innovation, reduced cost, facility for organizations to concentrate on core activities are some of them. According to the above mentioned report, certain factors contributed to the stunning growth of off-shoring. These factors are represented below by percentage.
- Reduction and control in job costs — 44 %
- Reduction in the number of internal resources — 31 %
- Helps in the global recolonization of the firm — 22 %
- Gain access to management strategies unavailable internally — 15 %
- Improved access to the IT resources unavailable internally — 34 %
- Improved business or customer focus — 28 %
- Accelerates the projects — 15 %
- Reduced time to market — 9 %
Sector-wise Representation of Offshore Outsourcing (2013)
- Manufacturing — 53 %
- IT Services — 43 %
- R&D — 38 %
- Distribution — 26 %
- Call or Help Centers — 12 %
Offshore outsourcing is beneficial for firms in improving efficiency, productivity, and business revenue. Like all other business strategies, outsourcing should be done with caution to the right, reliable provider to make it worthwhile and reap the benefits.