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What is Process Outsourcing?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 06 December 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Process outsourcing is a business strategy that involves contracting with individuals or services outside the business to oversee and manage specific tasks or functions that are usually handled within the corporate structure. Outsourcing of this type may involved turning over various back office functions to an entity outside the company, or involve contracting for functions that the company feels can be accomplished to better effect by others, such as conducting research. The goal of the outsourcing effort is to maximize the efficient use of resources within the company while still making sure all essential and desirable functions are in capable hands.

With business process outsourcing, experts are contracted to handle necessary company functions that have a direct impact on the ability of the business to continue operations. These functions include accounting and finance, human resources, and even general clerical tasks. Often, this type of process outsourcing is used as a way of keeping operational costs low and thus increasing the bottom line. For example, a business may choose to outsource the invoicing process to an outside service, making it possible for the accounting department to function with fewer personnel.

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Payroll outsourcing is another form of business process outsourcing that has become relatively common for both small and large businesses. Contracting with a reliable firm to manage the hourly and salaried payrolls, like the outsourcing of the invoicing process, makes it possible to operate with a smaller accounting staff. This saves the business a great deal of money in terms of salaries and benefits, while still ensuring that the payroll is accurate and managed responsibly.

Another form of this strategy is known as knowledge process outsourcing. The object of this kind of outsource activity is to allow the company access to expertise that is not currently available within the company, but that is highly desirable. A good example of this form of outsource strategy would be research of some kind. This may include marketing research to determine the response of consumers to a proposed new product line, the preparation and execution of a survey to determine what consumers currently think of a given company and its products, or even research into various types of legal matters.

Process outsourcing is often a long-term commitment between a business and the entity that accepts the outsourcing project. Payroll companies often enter into a contractual agreement to provide ongoing payroll functions to their clients. The outsourcing may be project-based and of a relatively short duration, such as the creation, management, and evaluation of the results of a survey. In any form, the goal of the process outsourcing is to allow the company to make the best use of its available resources while still accomplishing all the tasks necessary to keep the business profitable.

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