Popular Outsourcing Models
The constant advancement of business practices all over the world is giving birth to various new business management approaches, one of which is ‘Strategic Outsourcing’. Relatively new, this approach is a long-term, result-oriented business affiliation between the client and the service provider. In the case of Strategic Outsourcing, the services can range from a single business process, a set of processes, to a complete cycle of one or more processes. Often, managing multiple non-core departments turn out to be stressful for the business owners, who tend to focus more on the core revenue-generating processes. Besides, today, all types of businesses experience incessant pressure from stakeholders and high market competition, which compels them to constantly improve their product/service quality and reduce their prices to keep up with their competitors. Hence, every entrepreneur needs to save on costs, to thrive in the industry. Strategic Outsourcing immensely contributes to cost reduction by freeing the business owner from the burden of hiring full-time employees, training them and offering them all the employee benefits like provident fund, Medical etc. Also, this method guarantees high-quality and timely outputs, as the service providers or outsourcing companies are usually equipped with skilled and experienced work forces. Strategic outsourcing allows businesses to effectively reallocate resources like working time, efforts, fixed assets, money etc.
Hence, it is often considered a beneficial business management approach for start-ups or reputed companies looking to get more time for the core business operations, optimize production processes and cut down costs, simultaneously. Outsourcing models are mainly categorized under three labels: location, relationship and pricing.
The most popular outsourcing models are:
Location-Based Outsourcing
This outsourcing framework focuses on the distance or location of the outsourcing company.
On site Outsourcing
This outsourcing structure allows a business to have its outsourced team report in its office, sit and collaboratively work with its in-house team. On site outsourcing often speeds up the activities.
Onshore Outsourcing
This model implies outsourcing business operations to a third-party company, based out of a state or country, same as the outsource. In the case of Onshore Outsourcing, language barriers and cultural differences get completely omitted.
Near shore Outsourcing
Following this model, the outsource can hire service providers, based out in one of its neighboring countries, which is within the same time zone. Near shore Outsourcing is ideal for those looking for a more affordable engagement cost.
Offshore Outsourcing
Offshore Outsourcing means hiring service providers or outsourcing companies, based out of distant locations. This model is extremely advantageous for companies looking to cut down the production cost without compromising the output quality but based in countries, where labor costs are considerably high.
Relationship-Based Outsourcing
This outsourcing framework focuses on the responsibilities of the outsource as well as the outsourcing company and also on how they work collaboratively throughout the association period.
Staff Augmentation Model
Quite similar to On site Outsourcing, this model allows the client to get the outsourced team to join its in-house employees and manage internal programs. In such a case, the client gets complete control over the entire outsourced project, from the beginning to the end.
Managed Team Model
This model allows the client to make sure he gets desired outputs by making him and the outsourcing company share responsibilities and appropriately designate tasks.
Project-based Model
This model makes the outsource leave the outsourced task, entirely, in the hands of its outsourcing partner. In the case of the Project-based Model, the client just gives the brief and project requirements, and the service provider then owns the project throughout the contract duration.
Price-Based Outsourcing
This outsourcing framework focuses on the pricing(fixed or variable) structure of the outsourced services.
Fixed Price(FP) Model
In the case of this model, a standard rate is imposed on the service provider, depending on the outsource preference. The outsourcing company gets the payment only after the completion of the project is completed and approved by the client. The outsourcing company often requests flexibility in terms of payment disbursement after reaching a specific milestone, mentioned in the contract.
