Nowadays, the term “outsourcing” is known by almost all business owners across the United Arab Emirates. Nevertheless, the fact that is widely known doesn´t mean the term has only been learned in the last few decades. In reality, the knowledge of the term for HR Outsourcing goes back as far as 1970-1980 being able to mean various things such as asking for help from an advisor, delegating tasks to someone with higher ability, etc.
Even though it seems difficult to learn, in reality, the meaning of the term “outsourcing” could not be easier. Simply put, outsourcing means relegating any kind of task to an advisor or someone with higher abilities to do it than yourself. For businesses, outsourcing means hiring a 3rd party provider to perform tasks or other services for your company in order to save time or effort doing them themselves. This applies to various types of services such as IT services or payroll services.
Technically speaking, outsourcing emerged as far as the 1950s and started being commonly known around the 1980s as well as being used as a business strategy. This strategy was mostly driven by the “focus on core competency” strategy which was based on the capabilities, knowledge, skills, and resources that constitute the defining strength of a company. Since being used majorly as a business strategy, outsourcing has had a good impact on companies, helping them compete effectively with other bigger companies.
Outsourcing has evolved dramatically across the years, passing through 3 key stages. The first stage was from the 1980s, starting from the early 1980s to the late years of the same decade. It started with the outsourcing of non-traditional services to 3rd party providers for cost reduction.
This outsourcing strategy comes from a transaction cost approach where, as said before, the objective would be delegating tasks to the providers as long as it resulted more cost-effective to do so than doing them in-house.
Then between the early 1990s to early 2000s, the term “strategic outsourcing” was being used more and more as a term referring to an outsourcing strategic business process.
Strategic outsourcing was being used by companies to access external expertise that can be used to complement existing and future capabilities. The main objective of strategic outsourcing was the gain from competitive advantage by utilizing external resources, enhancing internal capabilities, and improving processes.
Lastly, there is the last key stage and the newest one ranging from the early 2000s to even this day. In this stage, the term “strategic outsourcing” was transformed to “transformational outsourcing”, where the main objective is to provide the flexibility to adopt new technological advances.
In other words, under this business approach, companies see 3rd party providers as an extended enterprise, able to deliver innovation and enhanced operational benefits.
Thanks to its various advantages, and processes, as of today, most business owners see transformational outsourcing as the “vehicle for business transformation into agile organizational forms”
From a business point of view, however, its real value lies in the ability to re-engineer business processes, or in other words, transform people health, processes, operations, and systems.
From legal advisors to HR management and IT outsourcing, outsourcing as a whole has become something most business owners can benefit from. And it has become the perfect type of service for companies that want to balance their labor income with proper performance and management or simply want to focus on other core aspects while not being negligent with some other type of service.
Lastly, since its creation and thanks to the vast meaning that the word can have, outsourcing services have grown a lot, being able to cover all kinds of services. The main types of services could be:
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Professional outsourcing: This type of outsourcing is considered the most important one, with companies being able to access high-quality resources. It includes accounting, purchasing, information, legal, technology, and IT services.
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IT outsourcing: As implied by its name, this type of outsourcing service covers all or part of a business’s IT needs. They can range from software development to maintenance and support. However, over time, companies started using these services to store and manage data.
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Manufacturer outsourcing: This type of outsourcing is not widely known as other types of outsourcing. However, it is quite industry-specific, meaning industries can outsource services exclusive to their type of industry. For example, a car manufacturer can have an outsourcing arrangement for building and installing windows in all their models.
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Process-specific outsourcing: This type isn´t industry-specific, but rather specific to the work of the business seeking them. For example, bakeries outsource the delivery process of their products to 3rd party providers. Business owners see potential in this since it allows companies to focus on their strengths while improving customer service and being cost and time-effective.