What is Outsourcing/Business Process Outsourcing (BPO)?
Most of the companies produce products or sell products or provide services to products. Companies, to get benefits, outsource to vendors/service providers.
Example:
- A car manufacturer may outsource certain parts to produced by other vendors.
- A recruitment company may outsource sourcing resumes to vendors.
- A costumes manufacturing company may outsource a part of its sourcing/procuring/spend analysis activities to vendors/service providers.
So Outsourcing is contracting done by the companies with vendors/service provider. Business Process Outsourcing is contracting of few or many business processes to vendors/service providers.
Why companies need Outsourcing?
- Adopting to Global Standards and Global Collaboration model.
- If it is IT based, No need to purchase hardware, software, implementation, upgrade, and support it. No need to hire consultants for implementation purpose.
- Adopting to Six Sigma Technologies/Standards.
- Improved metrics on Quality, Costs, Delivery, and Compliance.
What is Insourcing?
Insourcing is the opposite of Outsourcing. Instead of outsourcing activities to vendors, they insource the activities within the company itself.
Example:
Several Staffing companies head quarters are in USA and they have their own company in India. USA company, manages Sales Business Unit and in source accounts, recruitment, HR, and payroll activities to their Indian company.
What is Cosourcing?
Cosourcing is neither Outsourcing nor Insourcing. Part of the work is done by the company and another part of the work is done by vendor. In staffing industry, all business process is managed by the company.
Example:
In Payroll, they outsource a portion of it to vendors/service providers; In Recruitment, sourcing resumes alone is outsourced to third party vendors.
How companies evaluate Vendors/Service Providers?
After finding the exact business process to be outsourced, Companies send documents like Request for Information (RFI), Request for Proposal (RFP), Request for Tender (RFT), Request for Bid (RFB), and Request for Quote (RFQ) etc., to vendors/service providers and get response from them. Then companies read the documents and evaluate them whether vendors/service providers can take care of the business process outsourcing. Companies call those vendors/service providers, speak/discuss to them over phone/face to face and if they are 100% okay, companies agree and sign the contract to vendors.