OUTSOURCING INDUSTRY - Components and Types

Outsourcing essentially implies the transfer of non-core services to third parties who specialize in providing such services. It can cover a wide range of components depending upon the core competency as well as the requirements of the outsourcer.

  

Outsourcing may be broadly classified into the following types:

Ø  Information Technology (IT);

Ø  Human Resource (HR);

Ø  Customer Service;

Ø  Engineering;

Ø  Knowledge Services;

Ø  R&D; etc.

Business Processing Outsourcing (BPO) and Knowledge Processing Outsourcing (KPO) are the two major components of the outsourcing industry in India.

Ø  Business process outsourcing may be defined as the delegation of one or more IT intensive business processes to an external agency, which in turn owns, administers and manages the selected process based on definite and measurable performance.

Ø  Knowledge process outsourcing may be defined as a high added value process chain where the achievement of objectives is dependent on the skills, domain knowledge and experience of the people carrying out the activity. It is being claimed that KPO is one step extension of BPO.

KPO involves business processing outsourcing, research process outsourcing and analysis process outsourcing. KPO business entities provide typical domain-based processes, advanced analytical skills and business expertise, rather than just process expertise. KPO Industry handles more amount of high skilled work other than the BPO Industry.

In other words, while KPO derives its strength from the depth of knowledge, experience and judgment factor; BPO is more about size, volume and efficiency. The future potential of KPO is quite high because it is not restricted to Information Technology (IT) or Information Technology Enabled Services (ITES) sectors and includes other sectors like Legal Processes, Intellectual Property and Patent related services, Engineering Services, Web Development application, Business Research and Analytics, Clinical Research, Market Research, etc.

In today's competitive environment, focus is to concentrate on core specialization and core-competency areas and outsource the rest of the activities. Many companies and organizations have come to realize that by outsourcing non core activities, not only cost are minimized and efficiencies improved but the total business improves because the focus shifts to the key growth areas of the business activity.