Outsourcing (definition and characteristics)

Outsourcing It is an English term, widely used in business in the Spanish language, it is worth noting that it is not part of the dictionary of the Royal Spanish Academy. Its similar translation is Outsourcing, and is defined as the contract that companies make with each other to carry out certain jobs.

It is responsible for mobilizing the resources of one company, towards another externally through a contract for certain tasks and time, in this way, it is achieved that the company outsourced can develop certain activities on behalf of the first.

This type of practice has been involved in controversies, the criticisms refer to the labor lability of subcontractors and the decline in jobs of quality, especially when it is carried out from one country to another, that is, a company from a certain country subcontracts to a company from another country, neglecting the national workforce.

To make the subject clear, we develop simple questions and answers.

What is Outsourcing?

It is the third party outsourcing to carry out and take charge of certain activities complementary to the main but related activity of another company.

In this way the main company can focus and specialize in some activities, increasing efficiency and saving time.

What are the characteristics of Outsourcing?

• There are a wide variety of activities that can be outsourced.
• It is never subcontracted to another company to develop a main activity or that identifies the primary company.
• There must be good communication and the necessary information from both parties, to achieve a more fair and effective job.
• It is widely used regularly, with the aim of achieving rapid growth of the company.

What should be considered when outsourcing?

It is possible to contract almost any work under outsourcing, the basic and elementary rule is to make a comparison of the costs when hiring with the costs of doing it yourself.

Before doing this or outsourcing as you prefer to call it, various aspects should be carefully analyzed, among them the most important are:

• Comparison and analysis of costs (see them types of costs).
• Know the background, the experience and if it is possible to have references of the company to be hired.
• Be aware of the perception of other companies that at some point have carried out this process in the same area.
• The importance of the area or activity to be hired must be established, if it is or is considered a vital area or of great importance for the company, it should not be given in outsourcing, for two simple reasons.
• The legality of the contract must be considered, clearly established and established the work conditions and also the sanctions in case of non-compliance by the contractor.

Another basic and very important rule is not to reveal in outsourcing the functions or areas that you consider essential in your company, for two simple reasons: the name or image of the company can be damaged and the other is that you are generating high competition without wanting to your same company.

So that you have it very clear, for example, imagine Microsoft outsourcing for the programming or development of their softwares, I assure you that they would not do it, since it is among their tasks fundamental.

Outsourcing is good, but if done lightly, it can have negative consequences for the cost effectiveness, development and growth of the company, the most common are high costs and business immobilization.

Seen in a good way, it is much more than simple outsourcing, it is about establishing alliances with other companies specialized in tasks that are not fundamental to ours, so that, based on collaboration, develop larger projects more efficiently.

Benefits of outsourcing

• By hiring a company specialized in a certain task, you have the assurance that it is carried out successfully, giving a good result.
• Work is streamlined or automated, thus saving costs.
• Tasks that would require a large investment of capital and human resources are easily controlled if not outsourced.
• Costs fall and investment in equipment and plant is reduced.
• It allows the company to respond quickly to changes in the environment.
• It allows specialization and growth in the strengths of the company.
• Supports the construction of a shared value.
• Helps to redefine the company.
• Build a competitive advantage sustained by a greater reach of the company.
• It allows to improve delivery times.
• It allows the company to have operational diversity without incurring the need to train staff.
• Application of talent and the company's own resources in key areas.
• It helps to face changes in business.
• Extends the flexibility of the organization and reduces its fixed costs.

Disadvantages of outsourcing

• Lag when it comes to innovation.
• Unfair competition can be generated.
• The external supplier, having knowledge of the product or process in question, can start an industry of its own and become a competitor.
• The cost saved may sometimes not be as expected.
• The increase in rates makes it difficult to re-implement activities in a way that represents an advantage, which can be considered competitive for the company.
• Loss of control over the activity.
• Disadvantages of outsourcing.
• Operational problems when the outsourced company does not share the culture of the company.
• It does not constitute a moral commitment to do a good job, because, in the outsourcing, the staff are not part of the company and do not identify themselves ethically or emotionally with it.

When dealing with the subject you will often hear the term of outsourcing Well this is just the same outsourcing process that grants a company to increase its capacity to develop activities, delegating said work in a specialized company, thus to diversify or extend the business of the same.

Any company regardless of its size can outsource a service, it is commonly difficult for traditional companies to take on this challenge, while companies New ones easily adopt this modality, since they design their processes from the beginning so that they are carried out in the most efficient way possible, which achieves subcontracting minor activities of not fundamental importance in the development of the company, but which is equally important to be carried out with the greatest efficiency.