BUSINESS UNIT: STREAM (Magpantay, Denielle Rosero, Carmellou Tamares, Grazielle)

Types of Outsourcing

1. Professional Outsourcing includes accounting, legal, purchasing, information

technology (IT), IT or administrative support and other specialized services. This is the
most common area for these specific types of Outsourcing services, as there is a
potentially high cost savings associated with this type of arrangement. The company
pays only for services actually provided while having access to high quality resources,
which significantly reduces overhead costs.

2. IT outsourcing, a type of professional Outsourcing, is one of the more common services

outsourced today. It refers to the practice of seeking technology related resources or
subcontracting outside of an organization for all or part of an informational technology
function. Companies use IT outsourcing for functions ranging from infrastructure to
software development, maintenance and support. Almost every type of business today
has IT needs or at least deals with technology on some level, which makes it so
commonly outsourced. A good example of IT outsourcing would be if a company
outsources its IT management because it is less expensive to contract a third party to
do so than it would be to build its own in-house IT team. Or, an enterprise might
outsource all of its data storage needs because it cannot afford to or simply does not
want to buy and maintain its own data storage devices. These two examples are
common for smaller or medium size organizations. Most large businesses only
outsource a portion of any given IT function.

3. Multisourcing is another important term and provision of IT outsourcing worth

exploring more. Multisourcing is a term that can apply to any business area, but is most
commonly used when referring to IT outsourcing and IT services, as it is the blending
of business and IT services from the main set of internal and external providers in the
pursuit of business goals. It was first introduced by a market technology research firm
in 2005 and is most frequently used by large enterprises, where IT operations and
technology infrastructure are contracted to multiple vendors. This specific type of
Outsourcing has recently become popular as multi-sourcing leverages several "best-of-
breed" specialist teams that are expert in and focus on a single IT management function.
4. Process-Specific Outsourcing - Other Outsourcing services can be specific to a process
or internal procedure, which is commonly referred to as process-specific Outsourcing.
Today, it is very common to outsource specific operation-related aspects to other
companies or units that specialize in that specific service. For example, a bakery can
outsource the delivery of a packaged cake to a courier company like UPS or FedEx.
Such an Outsourcing contract would then involve details on delivery timelines, customer
contacts and costs, which then allows each company to focus on its strength and
improve customer service all while reducing costs and time. Process Outsourcing is also
used to describe the practice of handing over control of public sector services such as
(fire, police, armed forces, etc.) to for-profit corporations.

5. BPO - Besides professional process Outsourcing, manufacturer Outsourcing and

process-specific Outsourcing, there is also Outsourcing services for operational
activities. This specific type of Outsourcing is more common within a manufacturing
context than in other industries, as the nature of manufacturing provides opportunities
for specific operational activities to be handled outside of companies. For example,
machine maintenance and equipment repair can be acquired through Outsourcing
services or even specialized IT outsourcing services that specialize in that specific type
of equipment or machinery. Other types of operational activities can include
landscaping, cleaning services, facilities maintenance or property management.

6. Project Outsourcing - These Outsourcing services can be contracted to either manage

entire projects or complete portions of projects. There may be a number of reasons
why companies would want to outsource such a function, especially because there are
many benefits of outsourcing parts of projects, but project outsourcing most often
occurs because companies simply do not have enough available people in house or
enough skills, or funds to do it on their own. It's a more appealing choice than taking
the time and money to contract someone in house and long term or even to train
someone, especially if it is on a function that is commonly dealt with by IT outsourcing.

7. Offshore Outsourcing - The practice of offshoring means having the outsourced

business functions done in another country. This type of Outsourcing grew in popularity
before nearshoring and reshoring did. Work is often offshored in order to reduce labor
expenses. Sometimes outsourcing is used as a strategic way to enter new markets and
tap talent unavailable domestically or as an attempt to overcome current regulations
within the home country that prohibit certain activities. India, Indonesia and China have
emerged as dominant countries for Outsourcing offshore. A major reason why
 offshoring became possible and quite appealing to U.S. industries was due to the global
ubiquity of the Internet and massive telecommunications capacity in the 90s and on.

8. Reshoring

9. Nearshoring - The practice of offshoring means having the outsourced business

functions done in another country. This type of Outsourcing grew in popularity before
nearshoring and reshoring did. Work is often offshored in order to reduce labor
expenses. Sometimes outsourcing is used as a strategic way to enter new markets and
tap talent unavailable domestically or as an attempt to overcome current regulations
within the home country that prohibit certain activities. India, Indonesia and China have
emerged as dominant countries for Outsourcing offshore. A major reason why
offshoring became possible and quite appealing to U.S. industries was due to the global
ubiquity of the Internet and massive telecommunications capacity in the 90s and on.