Now a days outsourcing is a common business practice and is used for several business activities and services. But what does it exactly mean? The general idea behind outsourcing is to transfer business processes, activities or units to an external organisation that will fulfil these activities. Such an external company is specialised in certain processes and activities. Outsourcing can be described as buying or procuring services, products or skills from a third-party provider or supplier.

Most of the activities that are outsourced are non-core activities. Outsourcing of non-core activities leads to specialisation. Of course it is possible to outsource core-activities. This is depended on the strategic decisions within your organisation.

There are different ways to outsource activities, which are further described:

• Business process outsourcing
• Nearshoring
• Offshoring
• Outtasking
• ASP-services or leasing
• Onshoring
• Shared service centres
• Co-sourcing and Joint ventures
• Strategic sourcing
• Greenfield offering
• Global outsourcing
• Transformational outsourcing (transitional sourcing)

Business process outsourcing (BPO)

BPO is outsourcing is referred to contracting a specific business activity to a third-party supplier. The supplier fulfils the complete process. BPO is also referred to outsourcing of back office activities, examples are:

• Security
• Catering
• Cleaning
• Call centre work
• Pay-roll services

Nearshoring

Nearshoring is outsourcing of processes, activities and units to providers in countries that are relatively close to your own country. Of course nearshoring is dependent on the location where you operate. For the Netherlands, nearshoring means working with countries such as Poland, Hungary, Romania or Malta. For the United States nearshoring locations are for instance Mexico, Canada or Costa Rica.

Offshoring

Offshoring is basically the same as nearshoring, however, processes and activities are executed by providers in countries that are located further away than the nearshoring locations; overseas locations. For Europe this means outsourcing to India, China, Malaysia or the Philippines.

Outtasking

Outtasking is nothing else than hiring external expertise for a single action or execution of activities. This is interesting for especially the Small and Medium Sized Enterprises (SMEs) since it will remain your flexibility. The responsibility remains with the outsourcer, who is also responsible for taking the decisions.

ASP-services or leasing

Application Service Provision is leasing or hiring of business resources. In this case the client is bound to a contract for a certain period of time. Examples of ASP services are leasing of cars, business space, software or workplaces. The supplier is responsible for the procurement and maintenance and the customer is only the user of the resources.

Onshoring

Onshoring is outsourcing of processes and activities to an external company in your own country. Companies make use of onshoring in order to increase quality or knowledge that is not available in its own organisation. An advantage of onshoring is that there is no cultural of language difference.

Shared Service Centres (SSC)

The creation of shared service centres is especially viable for larger organisations. In business units, certain activities are decentralised fulfilled within each unit. Think about activities such as administration, ICT service and pay-roll services. These activities can easily be centralised in a SSC and thereby contributing to cost-savings and enhancing the quality level. A SSC is, most of the time, an independent unit centralising the same processes and / or activities together.

Co-sourcing and Joint ventures

A joint venture is a company or entity formed between two or more companies or participants. The participating companies or owners of the newly established company, contribute in equity. They have control over the new entity and share the revenue and expenses. In the case of co-sourcing the outsourcer and third-party supplier set up a joint venture entity for the purpose of outsourcing.

Strategic sourcing

Strategic sourcing means that a strategic decision is taken to outsource certain activities. Reasons for such a decision is that the financial position of the company might be at stake because of:

• High costs
• The quality of the services is not accepted anymore
• The used technique is aged compared to the competitor

In these cases it is decided to design the services differently.

Greenfield offering

In a Greenfield offering there is no transfer of activities or processes, but a new service is created with a third-party provider.

Global outsourcing

Global outsourcing is outsourcing of activities and processes to one or more suppliers in various countries. The reason to do this is that some expertise is only available with certain suppliers and in some countries only. A second reason is to reduce costs.

Transformational outsourcing

This is also called Business Transformation Outsourcing (BTO) and it is referred to as the ultimate form of outsourcing. The third-party supplier will be actively involved in the organisation strategy and organisation changes of the outsourcer. The purpose of involving the third-party supplier is to increase the quality level and level of maturity of the services.