Explanation:

 Companies use outsourcing to cut labor costs, including salaries for their personnel,
overhead, equipment, and technology.
 Outsourcing is also used by companies to dial down and focus on the core aspects of the
business, spinning off the less critical operations to outside organizations.
 On the downside, communication between the company and outside providers can be
hard, and security threats can amp up when multiple parties can access sensitive data.
 Some companies will outsource as a way to move things around on the balance sheet.
 Outsourcing employees, such as with 1099 contract workers, can benefit the company
when it comes to paying taxes.

Important:
Companies use outsourcing to cut labor costs and business expenses, but also to enable them to
focus on the core aspects of the business.
Outsourcing Business Models

● Shared Service Center is the outsourcing of a business function within an enterprise to a

highly skilled internal department or group. For example, the purchasing department of
one plant, may provide purchasing services to all other plants within a given
manufacturing company. Shared services may also provide to third parties.
● Spin-off- This spin-off company leaves the parent company to specialize in certain
activities which are outsourced by the parent company.
● Outsourcing to an external organization.

Other Potential Benefits of Outsourcing

● Renewed focus on core business

● In their efforts to build resilience from the top down, it appears
many business leaders have simply forgotten what a critical
role core management plays.

● Mitigation of risk by reliance on an expert

● When a production team embarks on a new project, there are inherent
risks that can be associated with a project’s processes. However, some
strategies can help mitigate these risks as well as anticipating the
consequences of these risks. These strategies can be used to identify,
assess, evaluate and monitor risks and any accompanying consequences.
In this article, we will explore five common risk mitigation strategies and
how they might be used.
● Improved customer satisfaction through improved process not part of the
enterprise’s culture or experience
 ● As customer expectations grow, the drive to improve customer satisfaction
also continues to grow. Investing in modern customer satisfaction
strategies like artificial intelligence, visual tools, omnichannel approach
will increase your ability to offer personalized experiences. 
In nutshell, delivering a better experience:
● Increases customer satisfaction and keeps your customers coming back. In
simpler terms, more loyal customers are worth the investment. 
● A higher customer satisfaction rate can be directly linked with increasing
topline revenue of businesses.
● Ability to reward workers with career opportunities in a specialty company
● Rewards are a powerful tool used for employee engagement. Recognizing and
rewarding your employees effectively is crucial for retaining top talent and
keeping employees happy.
● The key to successful employee rewards is being creative and thoughtful. Many
companies have even begun to use rewards for recruiting as they’ve become
a part of their company culture
●

Project Improvements
When challenges arise or clients request a change to a project, each process may require
improvement or updates.
Improving results” implies that results are actually measured; therefore, process
improvement projects are focused on improving key metrics of the business.

● Service improvements
change to an organization designed to increase customer satisfaction. This is a process of
engaging the customer to learn where you are earning the customer's trust and where you are
failing. Failures are an opportunity for improvement.
Technology Infusion
The other advantage of having improved technology is to make things more affordable
and cheaper for people. It is through technology improvement that people realize cost efficiency
currently. On the other hand, there has increase in machinery costing low price and we can’t
imagine. 

● Skills upgrade, retention and access

learning new skills is essential to advancing your career. It diversifies your job options
and helps you develop new techniques to keep up with the fast-changing world. But there are
other benefits, too.

● Avoidance of capital investment

As long as liquidity concern is adequately addressed, low working capital is desired to
ensure effective use of long-term funds.
The challenges of outsourcing

Outsourcing is difficult to implement, and the failure rate of outsourcing relationships remains
high. Depending on whom you ask, it can be anywhere from 40 to 70 percent. At the heart of the
problem is the inherent conflict of interest in any outsourcing arrangement. The client seeks
better service, often at lower costs, than it would get doing the work itself. The vendor, however,
wants to make a profit. That tension must be managed closely to ensure a successful outcome for
both client and vendor.
Another cause of outsourcing failure is the rush to outsource in the absence of a good business
case. Outsourcing pursued as a “quick fix” cost-cutting maneuver rather than an investment
designed to enhance capabilities, expand globally, increase agility and profitability, or bolster
competitive advantage is more likely to disappoint.
Generally speaking, risks increase as the boundaries between client and vendor responsibilities
blur and the scope of responsibilities expands. Whatever the type of outsourcing, the relationship
will succeed only if both the vendor and the client achieve expected benefits.
Organizations vs. institutions

1. An organization is a systematic or consistent collection of people, who work together for

achieving the desired end, under a common identity. Conversely, an institution is an
establishment, that dedicated to promoting a specific cause that can be educational,
professional, social, etc.
2. An organization is controlled by rules, regulations, and policies, while customs and
values are the regulating factors of an institution.
3. The structure of an organization can be centralized where power lies in the hands of the
supreme authority, or decentralized where the power disseminated. On the other end, an
institution has a decentralized structure, wherein power spread to various levels of
management.
4. The main objective of an organization is to earn money or provide services to the
members. On the contrary, the main objective of an institution is to impart education or
knowledge to the users.
5. An organization has a definite life cycle, i.e. they have birth, growth, maturity, and decay.
On the other hand, an institution is enduring in the sense that they have the capacity of
constantly growing, overcoming ability and adapting itself to extreme conditions, to take
a step towards the future.

Conclusion
The primary objective of an organization is to maintain the internal order of the organization
along with the effectiveness in the achievement of desired ends. Despite that, when it comes to
the institution, it goes beyond the goals of the organization.

Institution vs Organization
• Institution is bigger and deeper concept than an organization
• Institutions guide human behavior while organizations are formed to achieve special goals and
purposes
• Marriage, democracy, colleges, and churches are examples of institutions while charities,
companies, businesses etc. are examples of organizations
• Institutions have a bigger role to play in social lives in comparison to organizations
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