Outsourcing is delegating a process, such as product design or manufacturing, to a third-party company.The decision to outsource is often made in the intention of lowering cost or making better use of time and energy costs, or to make more efficient use of land, labor, capital, (information) technology and resources. Outsourcing is a division of labour.
The client organization and the supplier enter into a mutual agreement that defines the transferred services. According to the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to exchange the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities, real estate management, and accounting. Many companies also outsource customer support and call center functions like telemarketing, CAD drafting, customer service, market research, manufacturing, designing, web development, print-to-mail, content writing, ghostwriting and engineering. Offshoring is the type of outsourcing in which the buyer organization belongs to another country.
As a small island economy, Sri Lanka has no alternative other than to develop its export markets. When the governments of the past have realized this, they sought to promote export oriented trade. There onwards the rapid economic growth has followed.
In those days successful economic strategies attempted to attract capital to an economy in order to produce more goods that could be exported and traded for other goods that could not be produced at home. However, the technological advances of the late twentieth and early twenty-first centuries mean that it is no longer true that goods are tradable and services are not. In fact more and more services are easily tradable. And countries that are realizing this are reaping great benefits from adapting their economies to be able to better compete in services trade.
The main reason for outsourcing to Sri Lanka is the reduction of costs. It means lowering the overall cost of the service to the business. If the goods that we order from abroad are made in Sr Lanka, the cost of those goods will be much higher. Therefore it is better to order those goods from outside. Then the cost will be much lower.
Another reason is that it focuses on Core Business. Resources (investment, people and infrastructure) are focused on developing the core business. For example often organizations outsource their IT support to specilaised IT services companies. Outsourcing to Sri Lanka also gives access to talent. Outsourcing opens doors for a larger talent pool and a sustainable source of skills. This will exchange the ideas and skills of both the countries and they will be able to make more and more goods. The most important reason that Sri Lanka will achieve by outsourcing is capacity management. When Sri Lanka produces goods from what they have and exchange the excess capacity with another country they can easily manage the capacity.
Outsourcing also helps to improve the quality. Sri Lanka can achieve a change in quality through contracting out the service with a new service level agreement. Outsourcing also enhances capacity for innovation. Sri Lankan companies increasingly use external knowledge service providers to supplement limited in-house (inside the country) capacity for product innovation. Tax benefit is another reason for outsourcing to Sri Lanka. Countries offer tax incentives to move manufacturing operations to counter high corporate taxes within another country. Outsourcing also helps to gather knowledge. It helps to access to intellectual property and wider experience and knowledge.
Another main reason for outsourcing to Sri Lanka is the Operational expertise. Outsourcing gives access to operational best practice that would be too difficult or time consuming to develop inside Sri Lanka. Commodification is another reason for outsourcing. The trend of standardizing business processes, IT Services and application services enable businesses to intelligently buy at the right price. It allows a wide range of businesses to access to services previously only available to large corporations.
In conclusion, outsourcing has become a most important function in Sri Lanka to bring out new products at an ever rapid pace to meet market needs of the consumers.
Recent Comments