Unit 32: Outsourcing and offshoring

Outsourcing

Is where organizations pay subcontractors – outside suppliers – to do work that was previously carried out in-house.

Subcontractors

Outside suppliers.

In-House

To do work that was previously carried out in-house

Non-Core

Not a part of the organization’s core competences.

Core Competences

The skills that allow it to maintain its competitive edge

Competitive Edge

The fact that a company has an advantage over its competitors

Transaction Cost Analysis

To see whether it would be cheaper to outsource and benefit from a supplier’s expertise.

Expertise

Skills and knowledge

Capabilities

Skills – are central to its particular corporate culture.

Corporate Culture

The way it does things, how its employees think, etc.

Business Process Outsourcing

See section B.

Information Technology (IT)

Computer-based tasks.

Logistics

Transport and warehousing.

Strategic

Outsourcing that is important for the company’s long-term goals.

Offshore

Offshoring (see below).

Business Process Outsourcing (BPO)

Includes

Back Office Outsourcing

Which involves business functions such as

Business Functions

Purchasing – buying in materials, etc.

Payroll

Payment of employees’ salaries.

Billing

Preparing invoices and sending them to customers.

Invoicing

Same as billing

Front Office Outsourcing

Which involves customer-facing services, such as

Customer-Facing Services

The part of an organization that answers customers' questions, exchanges goods that are not satisfactory, etc.

Technical Support

Maintaining products bought by customers, training customers, etc.

Marketing

A job that involves encouraging people to buy a product or service

Offshoring

Outsourcing to companies abroad.

Globalize

Part of the trend for businesses and economies to globalize.

Inshoring

Bringing home operations that used to be done abroad.

Insourcing

When organizations that had outsourced activities bring them back in-house.

Back In-House

Bring outsourced activities back in