Wednesday, April 6, 2011

Strategic Outsourcing: A success phenomenon


Gone are the days when outsourcing used to be a cost saving mechanism. Today the business realizes the importance of strategic sourcing to evolve. Strategic outsourcing is process to identify the core capabilities of the company and outsourcing the rest. This involves analyzing the company’s capabilities and outsourcing the processes which are not so efficient. It involves improving the experience for the consumer and generating more profits by removing the bottleneck processes from the company’s core functions.

Bharti Airtel a telecommunications company was looking to exploit customers with low spending power in India. This was possible by optimizing all its processes and decreasing the costs of it core operations. The company was facing problems with its maintenance and service of IT infrastructure. The company realized that outsourcing these functions is the solution to its problems. The outsourcing structure for Bharti Airtel comprised of outsourcing the responsibility for the buildup, maintenance, and servicing of the telecom network to equipment to IBM.


Above is an example of strategy sourcing where the motive was just not to decrease the cost but also to reach a wider range of customers. Bharti Airtel defined its capabilities and outsources the once that were the bottlenecks. Thus we can say that strategic outsourcing is outsourcing capabilities to the right people, at the right time and at the right cost. Strategic outsourcing also involves taking control of the capabilities.

Another example of strategic outsourcing would be YouTube’s crowd sourcing. The idea was to get content from the people and to the people. Today YouTube is the largest video site where thousands of videos are uploaded every day. YouTube opened up voting and suggestions of people to improve their experience on the site.

This way strategic outsourcing can be of various types on-shoring, near-shoring, off-shoring or even crowd sourcing. Some critics have opposed outsourcing saying that it makes the company loose its competitive advantage and therefore all important operations should be performed by the company.

Things to ponder:

Does strategic outsourcing increase company’s productiveness or it reduces its competitiveness in the market ?

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