Outsourcing has its genesis in the Industrial Revolution that rocked Europe between 1750 and 1900. By the 20th century, the changing global political and economical climate, coupled with the Information Technology boom, had given further impetus to outsourcing, making it one of the crucial pillars for success for any business. In short, outsourcing was here to stay.
Initially, domestic outsourcing was the norm, where companies handed over non-core business functions like payroll processing, data entry, claims processing to other companies who had trained manpower who were equipped to take on these tasks. However, it was with globalisation that outsourcing can be said to have really come into its own. Outsourcing moved from domestic locations to foreign shores as the cheap labour and high skills proved to be an irresistible lure for cost savings.
Outsourcing today is a burgeoning industry, with North America being the biggest outsourcer, spending about 39%, followed by Asia with 31% and Europe with 25% in outsourcing.
Broadly speaking, outsourcing has three primary models:
1. The freelancing model
2. The outright project outsourcing model
3. The virtual or dedicated employee model
The freelancing model is the most common face of outsourcing. A freelancer is someone who is not associated with any particular company or organization but works independently. A freelancer can have expertise in just about any field and domain and is capable of handling outsourced assignments from more than one client at a time. A freelancer is most suited to handle the absolutely non-core functions of a business such as data entry, payroll processing, blog writing and so on. For short-term and low-cost projects, the freelancing model is the ideal one.
On the flip side, the freelancing model comes in-built with certain drawbacks that make it unfit for long-term and costly outsourcing. For one, the lack of effective communication tools between a remotely working freelancer and a client make online collaboration virtually impossible. Add to this the time zone difference and matters get further compounded.
Outright project outsourcing, or the classic offshore outsourcing model, propagated by software service providers. In this model, outsourcing companies take on entire projects and assigns a team to work on this project. The end-to-end management of the project, right up till the delivery, is the responsibility of the outsourcing vendor.
The biggest drawback of this outsourcing model is that the client has no control whatsoever over the outsourced project once it is handed over to the vendor. Right from the way it is executed to who will work on it, all gets decided by the team and its project leader that have been assigned to this client project. The client merely receives the finished project on time.
The third model of outsourcing is wherein neither the client's project is taken on in its entirety nor is a random freelancer working on it. The outsourcing vendor provides the client with their very own virtual employee. This virtual employee , as the name suggests, works exactly like a regular employee except that they do so remotely from the vendor's office. The client organization retains complete control over the outsourced work, decides how the work would be done and instructs and guides the remote employee on all aspects of the work, including giving any training if necessary. The vendor's office and staff act as representatives for the client, monitoring their virtual employee and providing all logistical and software support and inputs.
Without doubt, this is by far the best Outsourcing model and one that has grown in popularity. It offers the benefits of outsourcing while allowing the client organization to retain control over the entire process.