Understanding Outsourcing
Any company in any industry has core functions and non-core. Core functions are the value-adding activities that create the company’s main product or service. Mean while, examples of non-core functions are accounting and human resources for administrative services and after-sales for support.
Core functions are strictly done in-house – inside the company, but for non-core, a company has the option to do them in-house or just outsource. In-house production is when a company uses its own resources to produce a product or carry out a business process while outsourcing is contracting a raw material or business process to a supplier or a service provider outside the company.
Outsourcing is a strategy that companies to compete globally and increase profitability by focusing their resources to their core competencies. It also becomes a likely option when it is cheaper to buy raw materials from a supplier than manufacture them. This translates to large amount of savings for a company. Same with the raw materials dilemma, support and administrative services are sometimes cheaper when outsourced and it even lessens the burden of maintaining too many business processes. And the most popular type of outsourcing is Business Process Outsourcing or BPO. Among BPO companies, financial and after-sales services have the strongest demand.
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