Types of Outsourcing Strategies with Examples

Outsourcing can help you make the organization. Hence, you may read this article to understand the different types of outsourcing strategies with examples.

All organizations involve a set of processes. Some of these processes are substantially crucial for the organization’s growth (need your personal attention), and others can be well taken care of by others, i.e., outsourced. Outsourcing proves to be a great way to save time and money. Moreover, it also helps fill the skill gaps in the organization without requiring you to hire more workforce.

Owing to these and many other advantages, many organizations have started focusing on outsourcing strategies.  If you are also interested in outsourcing but are unsure about the best outsourcing strategy to follow, this article will significantly help you.  Through this piece of writing, we enlighten you about outsourcing strategies and their types so that you may make the best decision for your organization.

Without further ado, let us get started, beginning with the meaning of outsourcing strategies to help you understand them better.

Meaning of Outsourcing Strategies 

Outsourcing, as you may know, is a process of delegating a set of operations to a third party. It helps companies get the resources and expertise they need without spending quite a lot of money. Talking about the outsourcing strategies, they imply a long-term and result-oriented approach to outsourcing.

Now that you are in a position to understand different outsourcing strategies, let us look at them.

Various Types of Outsourcing Strategies 

Below are some global outsourcing strategies you may follow to reap the benefits of outsourcing to the fullest.

1. Business process outsourcing (BPO)

Business process outsourcing is one of the most common forms of outsourcing in strategic management. It refers to transferring internal business processes to a contractor outside the organization. Companies outsource various processes, like marketing research, accounting, hiring personnel, and others to any third party.

Some examples of business process outsourcing include the top outsourcing companies handling customer enquiries for a company. The following picture shows some of the commonly provided BPO services.

See the list of top indian outsourcing companies

2. IT outsourcing 

Many companies worldwide follow an IT outsourcing strategy. Since technology and experts required to work with it often involve hefty costs, companies prefer to outsource technology-related tasks to some competent outsourcing company.  Companies outsourcing the task of application development and maintenance to the best mobile app development companies is an example of IT outsourcing. Moreover, the following image shows more examples of this outsourcing strategy.

Read More – Mobile App Development Services

3. Professional outsourcing 

Hiring a talented and competent workforce is not an easy task, especially for a small organization. The recruitment, selection, and training of employees involve huge investments, both in terms of money and effort. Therefore, professional outsourcing, also known as body shopping, is also among the types of outsourcing strategies different organizations follow.

Professional outsourcing enables companies to get skillful talent without spending quite a lot of money. A few examples of professional outsourcing strategies are outsourcing marketing of products to professionals, availing the services of third-party accountants to file tax returns, etc.

Know about the best freelance websites to find online work

4. Multi-sourcing 

A large company involves IT and various other functions to complete a product. Now, the company may need to outsource these tasks to more than one vendor. This strategy is known as multi-sourcing.

Multi-sourcing is among the outcome-based technology and offshore outsourcing strategies offering a blend of IT and other functions. This type of strategy is most suitable for businesses needing the best IT specialists and transparency in their IT projects.

5. Manufacturer outsourcing 

Most often businesses outsource their product manufacturing to third parties. The reason is that making in-house products involves huge capital investment, raw material costs, and payments to factory workers. These kinds of outsourcing strategies are known as manufacturer outsourcing.

Apple getting its products manufactured from vendors in China and other countries is an example of a manufacturer outsourcing strategy.

6. Project outsourcing

Many times, companies may have multiple projects simultaneously. And, they may find it both impractical and inconvenient to juggle between various projects. In such a situation, they adopt one of the global outsourcing strategies, i.e., project outsourcing to complete all the projects within the set timelines.

One of the best examples of project outsourcing is found in legal firms where cases are outsourced to other attorneys when the workload is high.

7. Offshore outsourcing 

As you may know, the cost of factors of production varies from country to country. You may find a particular factor costly in your country and much cheaper in some other countries. For example, labor costs in a country like Uganda are significantly lower than in countries like India. In such a situation of differing costs, companies adopt one of the cost minimization outsourcing strategies, called offshore outsourcing.

Under this strategy, a task is assigned to some outsourcing service provider in another country having more skilled workers and other resources at a lower cost. Cisco outsourcing its IT services to India is an offshore outsourcing strategy example.

Concluding the Outsourcing Strategies 

This article explained the concept of outsourcing strategies and discussed them with examples. You may go through it to understand the core types of outsourcing strategies in detail.  Moreover, you may leave us a comment if something remains unclear or if you have any suggestions regarding this write-up, we are all ears!