Business outsourcing refers to contracting of operation and responsibilities of certain business-related functions to a third party vendor. Processes that are vital to the business operations but do not fall within the company’s expertise such as human resources, accounting, finance, administration, logistics, security, customer support are generally outsourced by the companies. Business outsourcing offers advantages such as optimizing processes, cost savings, concentrating on core competencies, streamlining organizational change and better technology & skills utilization.
There are two types of business outsourcing: Offshore outsourcing and nearshore outsourcing. In offshore outsourcing or offshoring, the contract of the operation is given to a vendor of another country. If the country of the vendor is located in a nearby region then the outsourcing process is known as nearshore outsourcing or nearshoring. Nearshoring is emerging as a preferred alternative to offshoring as it overcomes the problems of offshoring such as poor communication and differences in time zones, culture and mandate regulations such as data security act, while still offering the benefit of low cost.
Business outsourcing vendors are exploring new strategies and methods to improve their quality of service. The concept of business process improvement (BPI) is gaining significance and is expected to play an important role in the growth of business outsourcing. Vendors are also offering advanced services such as robotic process automation (RPA), business process as a service (BPaaS), business intelligence and secure private cloud infrastructure, which are some of the emerging trends in the industry.
Business outsourcing has emerged as a standard business strategy with increasing competition and growing pressure to increase profit margins. The global market for business outsourcing is picking up majorly driven by mounting pressure on the companies to justify their costs and improve operational performance. In addition to that, other benefits associated with business outsourcing such as increased efficiency, reduced business risks, boost innovation and lowered product development cycle are also propelling the growth of the market.
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