Outsourcing and Crowdsourcing
According to Dictionary.com, to outsource means to to purchase goods or subcontract services from an outside supplier or source or to contract out jobs and services. For example, a small business that outsources bookkeeping to an accounting firm abroad. According to the Wikipedia Outsourcing means “transfer or delegation to an external service provider the operation and day-to-day management of a business process”. It is used by every organization in one way or the other. The functions being outsourced by the business are basically considered non core to the business itself.
"The contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost. Outsourcing is often an integral part of downsizing or reengineering. Also called contracting out."
For instance, a car company requires a variety of screws and bolts. Rather than manufacturing screws and bolts themselves, the company might outsource their production to some other company or firms that specialize in making screws and bolts. Such outside companies or firms that provide the outsourcing services are referred to as “third-party providers”, or as they are more commonly called, “service providers”.
For businesses, outsourcing means saving money, lots of it. It is a fact that labor in other parts of the world cost significantly less than those in developed countries. Professional fees take up a big chunk of a company's budget. Labor in countries such as India and the Philippines are 50% to 70% cheaper than labor found locally so you can just imagine the amount of money that can be saved when companies hire individuals from other parts of the globe. To save money is the goal of any company. In the age of globalization, the best way to save money is to take advantage of the benefits that outsourcing brings.
Even though outsourcing exists ever since work specialization, but in the recent past, companies have started employing the outsourcing model for functions, like payroll, billing and data entry. These functions can be carried out more efficiently and cost-effectively, by the companies that acquire specialized tools and facilities and specially trained personnel for such functions.
Outsourcing has taken many forms in recent times. Like the past organizations still hire service providers to handle diverse business functions. But now many organizations prefer to outsource whole operations to another company or firm. These outsourcing companies are most commonly known as Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO). These are also the most common form of outsourcing.A Business process outsourcing usually includes Call Center Outsourcing, Human Resources Outsourcing (HRO), Finance and Accounting Outsourcing, and Claims Processing Outsourcing. Fundamentally these deals comprise of contracts that can extend for a number of years and cost the client company hundreds of millions of dollars. Often, the employees of the client firm who used to perform their work internally are transferred to the service provider and become their employees. IBM, EDS, CSC, HP, ACS, Accenture, etc are some of the leading outsourcing service providers in the Information Technology Outsourcing and Business Process Outsourcing fields.The success of an outsourcing company depends on mainly three factors. Firstly a proper executive-level support from the client’s organization for the outsourcing mission. Secondly, there should be frequent communication between the client organizations (that is hiring services) and the service providing firm or company. And last but certainly not the least a lot depends on the client's ability to manage and handle its service providers.
India stands top among few countries that provide business process outsourcing to the developed nations like United States. But in recent times, India is losing its sheen compared with the Philippines in outsourcing industry. United States-based companies are giving outsourcing to the Philippines because of its culture, accident similarities and strong positive perception towards BDO career. with the United States. Indian IT major IBM is planning to grow its BPO for customers support services in the Philippines.
The Most Commonly Outsourced HR Functions
The Reasons for HR Outsourcing
It is the practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people and especially from the online community rather than from traditional employees or suppliers. Simply mean to outsource some task to people external to a company or organization, usually via the world-wide web.
Some examples of crowdsourcing:
Possibly the earliest example of crowdsourcing is the collection of words for the Oxford English Dictionary (OED). In 1858, a group called the Philological Society contracted with over 800 volunteer readers to collect words from all available books and document their usages. Subsequently, the group solicited broader public input and received over six million submissions over the 70 years of the project.
In the year 1936, worlds largest car maker Toyota held a contest for seeking a new logo design. The winning design from over 26,000 entries remained the company's corporate logo until 1989.
Wikipedia is a project based on the crowdsourcing model, Wikipedia online encyclopedia launched as a collaboratively written and edited online encyclopedia in January 2001. Free registration enabled anyone to submit or edit an entry. The multilingual site now hosts several million entries in English alone.
Wikipedia's 14 million articles (3.1 million in English) have been written collaboratively by volunteers around the world, and almost all of its articles can be edited by anyone with access to the site. If you read an article and notice something wrong or if you have more information on the subject, you can hop on and edit the article or provide more in-depth explanations. This way the information is continuously verified and enriched by different people who share the same interest.
Crowdsourcing, also known as crowdfunding, is a noteworthy development that has tremendously helped the growth of collaborative software ventures. Unlike traditional fund raising campaigns, crowdsourcing utilizes the vast networking capabilities of the internet to find perfectly matched individual donors for projects. The donors do not necessarily receive individual credit or have a greater share of influence over the direction of the project; instead, the focus is on the project itself, and the benefits of its outcome. There are a significant number of websites dedicated to fostering crowdsourcing, with an encouraging rate of success.
Nearly 57% of surveyed employers use crowdsourcing for recruitment purposes: TimesJobs.com survey
A recently concluded TimesJobs.com survey has revealed that nearly 57% of the surveyed employers use crowdsourcing for recruitment purposes.
Though not a new concept, crowdsourcing has recently gained momentum as an efficient recruitment tool in the new age recruitment model Recruitment 4.0,which emphasizes on technology and networking advancements. Industry experts agree that the method of finding and seeking jobs has evolved. Recruitment 1.0 and 2.0 essentially focused on the active job seeker and traditional ways of hiring, recruitment 3.0 progressed to social media. Recruitment 4.0 goes a step further and focuses on making the most out of the information technology and networking opportunities available online and offline.
According to organisations that have used crowdsourcing for one or more HR functions, more than 60% have been highly satisfied with the results, revealed the TimesJobs.com study. Among the key benefits, over 60% of the surveyed employers count efficiency and cost-effectiveness as the biggest benefit of crowdsourcing. According to Chetan Indap, CEO & Founder, OnContract.com: ""Crowdsourcing exploits the 'productive potential of the millions'. Many western countries were outsourcing their work to India and China due to cheap labour.
The level of employee participation in crowd sourced tasks is quite encouraging, stated nearly 55% of the surveyed organisations in TimesJobs.com survey. Industry experts stated that going by the encouraging employee involvement in the crowdsourcing process, the use of technique in the times to come will only increase.Sharing insight with TJinsite (research and knowledge arm of TimesJobs.com) on the challenges of crowdsourcing, the respondents added that while they find crowdsourcing effective for many HR functions, there are certain limitations which make the process unsuitable for some processes/tasks.