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With the emergence of economic crisis left and right, businesses search for niches that make a lot of money. Although they desire to earn more, they are doubtful about spending on extra costs or investments that do not promise substantial profit. This is the main reason why most business owners are attracted to the various outsourcing benefits these days.
Outsourcing is now widely practiced in different industries. Outsourcing activities have three general types. They are technology services outsourcing, business process outsourcing and knowledge process outsourcing.
Sophisticated technologies and systems have craved their impact on the current business because of our fast-changing world. Swift evolution of business and economic models are driven by technological innovations. Businesses are left with no choice but to adjust to such changes that they may survive the cut-throat competition in the market.
The emerging technologies include applications, electronic commerce, network infrastructures, telecommunications and website development. Hiring additional employees to carry out tasks concerning technology would mean additional wages to pay for the company.
As a cost-cutting measure in-house employees may be required to perform the above-mentioned tasks. However, they may not be able to work effectively because of the many responsibilities they handle at the same time. This proves that it is best to hire an outsource firm that specializes on technology services. This is surely more cost-effective.
The effects of outsourcing also reached the different business processes when the Internet boomed in the 90′s. Business process outsourcing or BPO involves operational functions such as accounting, customer service management, documentations, human resources, health care, insurance, logistics, manufacturing, and media outsourcing.
In BPO front office functions are customer-oriented such as marketing, customer service and technical support. Back office tasks are more on internal work like billing, payroll and purchasing. These tasks are usually outsourced to third party firm especially when they are outside the core competency of the respective companies.
The current internet advancements made more operations available for outsourcing. They are bookkeeping, consultancy, data entry, editing, medical transcription, multimedia and proof-reading.
The outsourcing type which is relative to BPO is knowledge process outsourcing. This involves advanced research, analytical, and technical skills. Service providers in this type are expected to work independently. In BPO, all processes are client defined. Meanwhile firms offering knowledge processes are given managerial control. Some of the common knowledge processes are pharmaceutical research and development, intellectual property research, content writing, and database development services.
The greatest of the many outsourcing benefits is lower or cheap personnel costs. By outsourcing job duties to non-employees, a business does not have to pay consistent wages or offer additional employee benefits. Consequently, the company may pay lower taxes because independent contractors or virtual assistants who complete the outsourced projects, pay their own withholding taxes, social security contributions and health insurance fees.
One of the biggest disadvantages of outsourcing is undesirable results. This is especially true when a company hires a third-party firm to mass produce a product. When the finished products do not meet quality standards, the manufacturing process must be repeated – wasted materials and time.
Outsourcing has opened customer service jobs in foreign countries. Many large corporations including credit card companies, shopping networks and computer manufacturers are taking this step. Lack of communication may spring out from this. It can be very frustrating for a consumer who is talking to a customer service representative about a customer service issue which the latter cannot completely
understand. Language barrier just causes more frustration and does little to solve the problem.
While one of the positive outsourcing benefits is job opportunities for people living in a country with an inflated unemployment rate, it causes the number of jobless individuals to increase in the countries where the outsourced tasks come from.