Outsourcing is the transfer by an organization on the basis of a contract of certain types or functions of production business activities to another company operating in the desired field. Unlike services and support, which have a one-time, episodic or occasional nature and are limited to the beginning and end, the functions of professional support for the uninterrupted operation of individual systems and infrastructure are usually outsourced on the basis of a long-term contract (at least 1 year).

Outsourcing allows you to increase the efficiency of the enterprise as a whole and use the released organizational, financial and human resources to develop new areas or concentrate efforts that do not require increased attention.

According to the Outsourcing Institute (USA), outsourcing is an emerging type of optimization of enterprises, with the greatest growth observed in the field of finance and accounting. Statistics collected in 1997 by the American Management Association showed that even then 20% of the 600 firms surveyed had outsourced at least some of the financial and accounting operations, and 80% had outsourced some of the administrative functions.

Types of outsourcing

Manufacturing Outsourcing

In production (or industrial) outsourcing, part or all of the production of products or their components is transferred to a third party.

IT Outsourcing (ITO)

It involves delegating to an external specialized company the solution of issues related to the development, implementation and maintenance of information systems both entirely at the level of the enterprise infrastructure (maintenance of equipment or software), and the scope of work related to the development and/or support of the functioning of individual areas of the system (programming, hosting, software testing, etc.).

Outsourcing of knowledge management (KPO)

KPO involves the management of processes that require in-depth study or serious analytical processing of data, the formation and management of knowledge bases, which in the future can be used, among other things, to support decision-making. Outsourcing of knowledge management is now just beginning to become widespread in the United States.

Outsourcing by law
In some cases, the organization is obliged to transfer the functions of carrying out certain activities to third-party organizations. For example, a mutual investment fund cannot independently keep records, control and manage its own assets. To do this, he is obliged to resort to the services of a custodian, auditor and management company.

Most common forms of outsourcing

IT outsourcing

IT outsourcing is the partial or complete transfer of goods/works and services for the support, maintenance and modernization of IT infrastructure into the hands of companies. For them, the performance of such work is a core area of activity.

The development of corporate information systems has led to the possibility of their outsourcing. Until the 90s, some types of outsourcing (e.g., offshore outsourcing of call centers) were technically extremely difficult to implement. Often, outsourcing of information processes is understood as outsourcing of IT processes of organizations that are not directly related to the IT industry. In Western countries, comprehensive IT outsourcing is common, in which the entire IT infrastructure of the customer is transferred to the contractor.

Outsourcing in the field of IT is the transfer to a third-party contractor of a number of internal services and (or) internal services of the customer company, including on the basis of the use (for example, rent) of its software products, applications, hardware and infrastructure fragments. The simplest version of this practice is hosting the company's website. Many modern companies use outsourcing services, which indicates its popularity and profitability for the end consumer. Outsourcing can be considered as a service organized by a certain company, where several services are provided in a comprehensive manner to fully cover the needs of the client. In practice, the emphasis is usually on one of the specific services.

Maintenance of information and communication systems of the enterprise

Subscriber maintenance of computers is the most common type of outsourcing in the IT sphere in practice.

With this type of service, the customer is offered a comprehensive set of services that allows him to do without his own system administrator or significantly reduce his workload. Subscriber maintenance of computers, as a rule, includes the following types of services:

setting up and updating the hardware of the equipment;
software configuration and updates;
creating protection against hacking and network penetration;
antiviral prophylaxis;
prompt repair and replacement of equipment;
preventive measures to prevent breakdowns and wear and tear of equipment;
backup of information;
consulting and training of personnel.
In practice, the same companies often provide related services - maintaining the operability of office equipment, upgrading the computer park, laying local networks, connecting IP telephony and setting up PBX, as well as IT audit and consulting. Therefore, computer maintenance often takes the form of servicing the entire complex of information systems of the client enterprise.

Data Center Outsourcing

In many industries, companies are faced with the need to use the services of data centers or data centers (Data Processing Center). The construction of its own data center requires the company to attract financing, carry out general construction work, solve problems with power supply, purchase server equipment, organize a data center operation service and ensure security. Data centers periodically require current and major modernization. Many companies prefer to conclude an SLA agreement with a commercial data center instead of creating an enterprise data center and receive data center services as a service.

External hosting of information and communication systems (SaaS)

Outsourcing of IT system hosting ( Software as a Service, SaaS) is a type of outsourcing of information processes. Unlike regular hosting, a SaaS outsourcer not only provides the physical hardware to host information systems, but also provides their installation, support, and updates.

In the SaaS model, customers do not pay for owning the software per se, but for renting it (for example, for using it through a web interface). Thus, unlike the classic software licensing scheme, the customer incurs relatively small periodic costs, and he does not need to invest significant funds in the purchase of the system. The scheme assumes that if the need for software is temporarily absent, the customer can suspend payments.

The SaaS scheme clearly demonstrates the relationship between the different types of BPOs. A company that develops SaaS systems for HR management or accounting can simultaneously be a provider of BPO services in these areas.

Outsourcing in the financial sector

Accounting

Accounting outsourcing is one of the options for accounting support of accounting and reporting functions at an enterprise, for which the head of the enterprise is fully responsible. In this option, in order to ensure accounting at your enterprise and provide the necessary reports to the Federal Tax Service and extra-budgetary funds, a specialized company is used. Forms of cooperation can be very diverse, ranging from the formation of "zero accountability" to regular cooperation on a daily basis.

Theoretically and practically, an accounting company can fully perform all the functions of the company's accounting department up to the execution of bank payments and the issuance of primary documents to counterparties, as well as payroll. However, this does not exclude the possibility of building sufficiently complex and flexible business processes using external companies and our own employees to achieve maximum efficiency.

Do not confuse accounting outsourcing with the involvement of a freelance accountant. Outsourcing is mainly characterized by the transfer of regular functions. At the same time, the involvement of a freelance specialist should be regarded rather as the transfer of episodic volumes of work to a specific performer.

One of the obvious disadvantages of outsourcing financial processes and accounting is the concerns of customers for the safety of their financial information, for the correctness of maintaining and submitting financial and tax reports to regulatory authorities. And although large outsourcing companies have the appropriate competence and are responsible to the customer for the correctness and timeliness of the provision of information, nevertheless, it is the financial department and the accounting department of the customer who are responsible to the state for the correctness and timeliness of reporting. 

A critical asset of any outsourcing company is its reputation in the market and feedback from already established customers.

Inventory audit

Outsourcing the inventory process is usually associated with solving problems related to property accounting. A technology based on bar coding is used. The carrier of information about the object to be accounted for is a special self-adhesive label with a barcode, which is destroyed when you try to remove it (analogous to an inventory tag). Fixed assets, goods and materials are marked with labels or tags. To collect information about property during inventory, data collection terminals with a built-in barcode scanner are used.

Ensuring mutual settlements with personnel

Payroll outsourcing is usually based on a SaaS business model. In this case, it is the calculation of wages, bonuses, travel allowances, allowances, compensations, etc., and not the implementation of payments.

Outsourcing in the field of personnel management

 company is forced to solve problems related to personnel management, such as hiring employees, calculating compensation, and tax reporting. At the same time, such activities are core only for recruitment agencies. That is why the practice of outsourcing HRO (Human Resources Outsourcing) has gained significant popularity. Processes related to the selection and search of employees (as well as personnel leasing and outstaffing) are transferred more often, and HR administration and payroll processes are less common.

The main areas of use of personnel outsourcing are:

Outsourcing of logistics and warehouse personnel. It is the use of outsourcing of logistics and warehouse personnel that is a solution for enterprises that require a quick launch and ensuring the functioning of an entire direction.
Outsourcing of construction personnel. Companies that outsource construction personnel solve the issue of seasonal activity in their area.
Outsourcing of sales personnel. The use of outsourcing of sales personnel provides any retail chain with the necessary number of personnel directly from the day of its opening.
Outsourcing of hotel and restaurant staff. The issue of the highest qualification of employees, which has a direct impact on the level of customer satisfaction, is solved through outsourcing of hotel and restaurant staff.
Outsourcing of production personnel. Difficulties in the implementation of auxiliary processes are excluded in the case of outsourcing of production personnel. At the same time, personnel outsourcing can handle any direction.
HR outsourcing. Outsourcing of HR functions.

Use of freelance personnel

Outstaffing – a recruitment agency (or other structure) registers the company's employees, while the employee remains at his workplace and performs the same duties. Depending on the specifics of taxation, this can significantly reduce the real cost of hiring or allow you to receive special benefits for companies with a small staff. The development of this situation is the assignment of temporarily free personnel to work in different enterprises (personnel leasing).

Retail Outsourcing

Retail outsourcing is one of the types of business process outsourcing that involves the transfer of a number of operational functions of a retail enterprise to third-party specialized contractors. First of all, we are talking about the resource support of logistics and cash settlement functions at the outlet. It includes various types of work related to the movement of goods from the manufacturer to a specific place on the store shelf, including transportation, warehouse services, cash transactions, support on the counter and merchandising. In addition, retail outsourcing includes functions related to packaging, pre-packing and assembly of goods, which can be carried out by external companies both at their production facilities and directly in the warehouses and retail areas of retail enterprises. The responsibilities of the contractors involved include the organization of the entire turnkey business process, including the selection, training and rotation of the line personnel involved, quality control of the services provided, registration of the required permits and permits.

Office Printing Outsourcing

Office printing outsourcing is the transfer of all office printing equipment to management with the further installation of the outsourcer's printing equipment. At the same time, the company switches to payment per printed page.

Other forms of outsourcing

Legal and information support

Often, companies prefer to use outsourcing instead of an in-house lawyer. As a rule, this is much cheaper than maintaining your own specialist. Legal services, like accounting, are needed by any enterprise, institution or public organization, but in most cases, the workload is simply not enough to make the use of an in-house lawyer profitable. 

Publishing Outsourcing

Typical examples of outsourcing are also the transfer of the functions of translation, printing and post-press processing of documents to a third-party contractor, the publication of corporate newspapers and magazines. The publishing house has a staff of editors, proofreaders, a layout department, freelance authors. Third-party organizations can be involved in translating materials, printing publications and distributing them (the most resource-intensive and expensive areas). A separate area of publishing outsourcing is the organization and provision of sales of print media.

Logistics outsourcing

The phrase "logistics outsourcing" means the purchase of services from a third party for inventory management, transportation of goods, their warehousing and all business processes related to these operations.

Social Outsourcing

Social outsourcing is the transfer by social institutions on a permanent basis to external performers of certain of their functions, including the provision of social services.