Outsourcing Paper

Kiani Lane

Service Operations

6/18/2016

Outsourcing Paper

        Outsourcing use to be exclusively a tool of the manufacturing industry; however, today the service industry is increasingly employing this tactic to improve business functions. In the US alone the service industry is responsible for 83% of total employment; this massive industry in turn has been determining how to apply and utilize outsourcing as a tool (Dontigney). Thus services are discovering the best methods to apply outsource and how to overcome obstacles involved in new the business approach.  

        In an article by Ugnė Blusytė, she examines the many facets of how outsourcing is applied to the service industry. There are three levels that give rise to outsourcing; tactile, strategic and transformational. The tactile level helps organization solve problems they already have such as “lack of funds, incompetent management, or lack of specialist” (Blusytė 2). Strategically, outsourcing is used to create long-term value, by rewarding reliable outsourcers with long-term contracts. Finally, companies use outsourcing at a transformational level when restructuring, often times done to “gain a leading position in the market” (Blusytė 2). Outsourcing in service industries was initiated from the IT sector but today includes many more sides in business processes. These business processes include; finance and accounting, investment and capital, purchases, logistics, real-estate management, and most importantly human resources. While these all open up many opportunities for service industry to outsource, there are still many condition that need to be met before diving in. The author identifies the conditions need as; no requirement for face-to-face servicing, high level of high information content, work processes that are telecommutable, high wage differentials with similar occupation in the destination country, low barrier to setting up, and low social-networking requirements (Blusytė 3-4). Finally, in an article by Mustafa Akan he reveals that research shows two main ways service outsourcing differs from manufacturing outsourcing; “with services it is natural to consider rapid adjustments to capacity,” and “service processes naturally exhibit economies of scale” (Akan 1-2). 

Outsourcing is applied to the service industry as an extra hand that increases proficiency for companies. In an article from the Houston Chronicle author Eric Dontigney explains crucial benefits outsourcing specialized tasks has on a service business. For starters, a huge reason outsourcing is valuable to the service industry is the ability to delegate specialized tasks and reduce or eliminate the costs that were being paid to do these specific jobs in-house. Also it is more efficient and effective to hire a company who is highly skilled in that specialized matter. Another benefit of outsourcing specialized tasks is that it often reaches economies of scale for the business.  Furthermore, IT has consistently been the key enabler for allowing the service industry to outsource and continues to play a huge role in the relationship. Blusytė points out that the “development of information technology has therefore caused service outsourcing to accelerate” as it gives companies the ability to communicate quickly with the outsourced country, gives management access to those employees, and the ability to remain flexible. Overall the service industry is continuing to discover the best ways to implement outsourcing and has so far found success that enhances the service industries abilities and cuts costs.