The Language of Outsourcing
There are numerous terms related to outsourcing and the way people use the terminology varies among location and industry. It is common for outsourcing terms to be interchanged and there are no set definitions. An overall understanding of what the words mean though, can help when talking about the subject of outsourcing.
Most executives know that outsourcing is defined as delegating business functions to a supplier or external partner. What many individuals do not realize is that there are different types of outsourcing, including IT outsourcing, (ITO) and Business Process Outsourcing, (BPO). With ITO, some or all of the IT services are sent to another provider. The outsourced function can be software development or IT infrastructure services. BPO refers to the delegation of non-core IT intensive business processes, such as supply management, data entry and customer service.
There are many terms used to describe the geographical proximity of the outsourcing provider to the customer. Onshore outsourcing means that a company is sending work to a provider located in the same country. In the United States, that would basically mean a company contracts with a U.S. supplier for business services. Near shore outsourcing refers to contracting with a company located in a nearby or bordering country. Usually near shore means that the outsourcing provider is a short travel distance and may even be in the same time zone. For the United States, Canada or Mexico would be considered a near shore location. Global sourcing, also known as offshore outsourcing, offshoring, describes the process of delegating functions to a provider located in a distant location, several time zones away. India, China and the Philippines are all considered to be offshore locations for U.S. based companies.
It is important to also be well-versed on the key players of the outsourcing relationship. The company looking to outsource work is referred to as the buyer, outsourcer or customer. The firm that accepts the outsourced work is called the supplier, service provider, outsource service provider, vendor or resource.
Companies looking to outsource should consider sending work to more than one service provider, which is known as multi-sourcing. When the outsourcer utilizes the services of more than one provider in different geographical locations, this is known as an outsourcing portfolio.
A&E Consulting can bring you up to date on the newest terms in outsourcing. We can assist you in choosing the right global sourcing provider and establishing the business relationship. In addition, we will manage the first outsourced project to make the transition as smooth as possible.
Tags: business process outsourcing, global sourcing, it outsourcing, mult-sourcing, near shore outsourcing, offshore outsourcing, onshore outsourcing, outsource service provider, outsourcer, outsourcing portfolio