After liberalization, Indian companies have become market-driven. Many business houses are undertaking corporate restructuring and re-engineering in order to compete globally. Companies are defining the business they are in and the rest of the activities, which are not related to core, are being outsourced. This article discusses the strategic aspects as to how effective outsourcing relationships can pave way for core competency.
In the broader sense, it is rather hard to understand the origin of the Business Process Outsourcing (BPO) revolution and why it represents a huge opportunity for India today. C K Prahalad's `Core Competency' theory helps big corporations around the world. The basic concept of the theory which is to identify what your core competencies are, focus only on them and get out of everything else is simple and striking.
One of the more prominent phenomenon that this theory brought out was `Business Process Outsourcing'. The area of outsourcing these days represent the new information age in which an organization develops and works with what they can do best in their areas of competencies. Through the process of outsourcing an organization delegates the major, non-core functions to any service provider who is considered to be an expert in the area.
The trend of outsourcing began in the 1980s in the US in various aspects of business organization as a way to cut costs. One of the assumptions was that outside service providers were in a good position to hire workers with low wages and to deliver economics of certain tasks. That way outsourcing got a boost in the 1990s with the concept of 'core competencies' as the managers had to focus their time and effort on developing the core competencies.
Outsourcing has been used to reduce bureaucracy and to encourage a more responsive and cost-sensitive culture by introducing external market forces into the organization. It has also been pursued for several operational reasons such as greater efficiency or better service performances and also for cutting costs and used to obtain specialized expertise that is not available in-house.
Outsourcing takes place when an organization transfers the ownership of their employees to a supplier. In outsourcing its human resource, the organization does not instruct the client on how to perform its tasks but focuses on communicating the results the organization requires. |
