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Glance at well-organized for all the business functions and need help deciding whether the organization consider outsourcing, centralizing or offshore? All three options are great for all business holders to think of to enhance efficiencies, reduce extra costs and improve or upgrade service.
This article covered all the aspects of this topic. So, let’s understand this concept and determine which is best for the business.
Firstly, focus on the meaning of Outsourcing, Centralising or Offshoring.
Table of Contents
Outsourcing is a business practice that contracts out specific business procedures, tasks or services to a third-party source.
Outsourcing is done to an outsourcing service supplier placed in the same or other countries. This is known as offshore outsourcing, when an outsourcing service provider is located in a different country.
Centralization always is the first thought because of the capacity to obtain control. The company can regulate their employees’ working hours and activity in the office and maintain the quality of their work. The company’s centralized service helps integrated Geographic’s and functions, build standardization, increase efficiency, error and replication, and potentially minimize cost.
Offshoring is transferring activities or ownership of a final business process to another country from the country where the organization receiving the services is located. This is mainly to approach a market where the labour cost is lesser than the parent country, but also to access additional skilled labour or build a business existence in another country. The companies offshore either through an outsourcing arrangement with a third party or set up their own Global In-house Center (GIC) in the offshore place, among other business models.
After got to know the meaning of outsourcing, centralising or offshoring, but still, it’s not cleared which is the right choice for the organization. Let’s understand the following benefits of these terms:-
Why do companies prefer to outsource? There are many reasons why a company prefer to outsource. Benefits of outsourcing why should a company consider this option for their organisation are:
Without centralised management, there will be variability in passing the information to employees because there must be clear lines of authority. Planning the company’s vision from the top for a trouble-free implementation of its visions and strategies. The organisation’s stakeholders, customers, suppliers, and communities receive consistent information.
The decisions are passed to the lower levels of the organisation for execution. If lower-level managers are engaged in the decision-making process, the process will take much time, and disagreement will arise. The implementation process takes too much time and creates complications because some managers may disagree with the decisions if others ignore their input.
Using high-quality equipment or machinery minimises potential wastage from manual work and helps guarantee high-quality work. Work standardisation also reduces the replication of tasks that may result in high labour costs.
Offshoring provides many similar benefits as outsourcing and centralising, such as:
Quality is the most crucial factor to focus on when deciding which option is best for the organisation. Minimising the cost of the business is the priority for most organisations. However, work quality should be the focal point in choosing whether or not to outsource for the organisation. Choose to centralise if the team can work harder and offer best-in-class service, and it’s a value-add to the business. And if organisations need all-time support from offshoring, that may be the best option.
An organisation should focus on the following factors when determining which business function strategy is suitable for the organisationOutsourcing, Centralising or Offshoring:
The critical element to consider in the decision-making process is in which area the company is the best performing. Never compromise with the quality, control the goal, and control the cost. Remember that costs will increase in future due to adverse consequences if the company choose the cheapest option.
Outsourcing, Centralising or Offshoring are all three options for the company, but they depend upon the many factors within the organization. Every organization has particular motives, and their operational functions are discrete from each other; one company’s core function is to offer consulting services to the customer, and another organization is to manufacture the product. So, the company’s core activity is distinct; as per their activity, the organization chooses which strategy is the best Outsourcing, Centralising or Offshoring, and other factors are also involved, like cost factor, quality assurance, vision, labour, and many more.
Read our Article: Outsourcing your Business Functions? 10 key services
Muskan has completed a Bachelor of Commerce and MBA with a specialisation in Finance and Marketing. She is very dedicated, focused and attentive towards her work. She has a decent knowledge of Finance and Accounts with a prior experience in the finance domain. She secures experience in research work which enhances her knowledge and skills.
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