Any potential business idea or strategy once introduced, gains massive attention, owing to its success and creates huge market competition. Outsourcing is one such trend, which revolutionize the world’s business practices. Though the practice dates back to 1970 and was initially practiced in manufacturing industry, it soon established itself across all industrial segments. It has built better businesses and stronger economies. After Business Process outsourcing (BPO) and vertical outsourcing, the recent direction in outsourcing is selective outsourcing.
Outsourcing only part of an activity or process and performing the rest in-house is selective outsourcing. Through selective outsourcing, organizations contract and outsource only critical activities /services while maintaining the overall control with them.
As practice, companies opt for selective outsourcing, with outsourcing only selected modules or activities to supplier before reaching the long term agreement. This allows the investor to maintain the overall control of the activity and evaluate the supplier’s expertise.
Selective outsourcing over traditional outsourcing
With outsourcing, companies found a viable option of reducing their operational cost as its gives them freedom from investing in infrastructure, technology and at backend operation staff. Though outsourcing is a proven success mantra, companies are now getting more selective while deciding upon their outsourcing method. They are now hiring different outsourcing partners for different tasks based on supplier’s expertise. Some of the reasons for this choice are –
- Traditional outsourcing results in loss of control and visibility of investor.
- In traditional method, the company that outsource looses the in-house expertise.
- With increasing competition, total outsourcing costs are high as compared while selective outsourcing has lower and predictable cost.
- With selective outsourcing, companies have access to operational knowledge and ability to control the supplier.
- Selective outsourcing offers flexibility to adapt and improve as per changing market and technological demands.
- Selective outsourcing facilitates improved performance and creates lesser dependency on supplier.
Today, companies pay more premium on quality, customer satisfaction and market excellence which is promoting the growth of new ideas in outsourcing like outcome based outsourcing* and selective outsourcing.
*Outcome based outsourcing has been explained in a previous post.