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Outsourcing - For Cutting Costs

Outsourcing is the delegation of projects or jobs to a sub-contractor who could be based in the same country or outside the country. The word outsourcing has been used a lot nowadays. Lot of outsourcing in the IT sector has made this a buzzword.

Outsourcing is not only done in the IT sector. Many other sectors like manufacturing, fashion designing etc are outsourced. Companies outsource mainly to cut costs. The salary of overseas staff is quite less compared to the current staff salary.

Nowadays, most of the software and other IT related work are outsourced to countries like India, Singapore and China. The hourly wages are low in these countries compared to UK and US wages. When a company can get the same quality at a lower price then the company can outsource some of its operations as it is a good option. Out of the fortune 500 companies in US, nearly 400 companies outsource their work to countries like India and China. UK and other European countries also outsource their work to many Indian companies. Call centers have sprung up in India, Caribbean and Philippines. Telemarketing work has been outsourced by many US banks to many call centers in other countries. The main job of these call centers is to sell more credit cards, insurance and provide customer support services.

In the manufacturing sector, components, textiles etc are outsourced to countries where the labor costs are very low. Most of the companies outsource around 50% of the work. For example: A car manufacturing company could outsource its gear parts to a company in India to cut down its costs. To manufacture the gears, the company has to invest a lot, so they outsource it to other companies, which has the competency to manufacture these products.

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