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Modes of outsourcing



Outsourcing has attracted increased attention due to the emergence of offshore destinations such as India, China and Eastern Europe and the alleged threats these destinations provide to the jobs in the US and Europe. However, outsourcing occurs in various other modes such as on-shoring, near-shoring and home-sourcing. These modes have been described in Table 1 below.

 

Table 1: Modes of Outsourcing

Outsourcing Mode Description Example
On-shoring Outsourcing to a vendor that is located at a destination domestic to the customer Burger King Corporation, a US based chain of restaurants, lost its laboratories in the havoc created by Hurricane Andrew in 1992. The company was hence forced to outsource its quality assurance functions to other companies in the US. However, even after rebuilding its laboratories, Burger King still on-shores its quality assurance functions as it allows the company to make productive use of its internal resources.
Offshoring Outsourcing to a vendor that is located in a far-off country (Refer to the report on Outsourcing to India for more details) Numerous UK-based BPO companies such as Capco, Ventura, Capita Group and Vertex are now providing offshored services to their clients through their operations in India.
Near-shoring Outsourcing to vendor in a nearby country Williams Lea, an information management supplier based in the UK near-shored the development of its computerized purchasing system to Crimson Wing, commercial systems solution provider in Malta.
Home-sourcing Outsourcing to workers who work from home

Rural Sourcing Inc. is an outsourcing firm based in the US offering IT services through home-sourcing. Rural Sourcing provides superior quality services at lower cost by hiring employees living in rural areas of Arkansas, North Carolina, Missouri and Illinois.

 

Companies are also resorting to the option of multi-sourcing where a combination of offshoring, on-shoring, near-shoring and home-shoring is used. For example, Satyam Computer Services provides its customers a global delivery mode called Rightsourcing which is a combination of onsite, offshore, on-shore or near-shore delivery capabilities. This model enables Satyam’s clients harness additional time and cost advantage as compared to sourcing via a single mode.