Outsourcing has moved from tactical to
strategic level and companies have started pursuing outsourcing as an
important business strategy. Companies generally use the following
three levels
of outsourcing:
Project level: Discrete
aspects of a project are outsourced
Program level: Different
projects in a program are outsourced
Division level: The entire
operation of a division is outsourced
There are various factors that govern
the decision to outsource at a particular level by a customer. These
factors include:
Critical nature of the work: If the work is critical to a
company’s core business, the company will prefer to outsource
as little as possible and in discrete parts.
Faith of the customer in a vendor: The higher the faith a
customer has in its vendor, the more it will outsource. In some
cases, it will outsource even the operations of an entire division.
Cost advantage: Cost efficiency is an important deciding
criterion, with larger work being outsourced if cost savings are
large.
Proven track record of the vendor: A proven track record of
the supplier inculcates a feeling of trust and the customer prefers
to outsource larger work to the vendor.
