While outsourcing is already a common term among companies that want to maintain quality output at a minimum cost, its meaning still varies depending on the reason, purpose, and need of a particular industry. This article will help you understand the different types of outsourcing and determine the one that is most applicable to your business.

Application Software. Software development is perhaps the most sophisticated type of outsourcing. It is utilized by a lot of companies as it focuses on high level tasks such as requirements elaboration and project management design. By contracting out their application software needs, companies will enjoy:

• Reduction in expenses;
• A self-managed team; and
• Less production down time.

Information Technology (IT). This type is embraced by companies that are looking for technological flexibility — from complete transformation of service to addressing a specific cost or performance issue. It aims to reduce confusion and cost complexities, especially of organizations that have limited IT resources. Due to its many benefits, corporations such as EDS, IBM, and Unisys have been successful in getting the full ownership of the IT assets of their clients. Some of the advantages that they have gained over the years include:

• Business transformation through continuous innovation
• Improved customer satisfaction
• Greater value for less money

Manufacturing. Manufacturing outsourcing adds significance to a business by sustaining strong value chains such as branding, sales channel dominance, and access to raw materials and technology. It is typically utilized by organizations that have insufficient interface management, financial transparency, and supply chain risk management. Its advantages include the following:

• Better pricing on components
• Flexibility to meet clients’ demands
• Ability to focus on core competencies
• Access to expertise
• Strong business partnerships
• Better margins
• Quality product
• Control to intellectual property

Business Process. Business process is one of the common types of outsourcing that uses a third-party service provider to achieve and improve company’s goals and performance. It was originally associated with manufacturing firms like Coca Cola that outsourced large segments of its supply chain into different countries. Over the years, it was adapted by organizations that need to sustain business productivity and efficiency while reducing operational risks and overhead costs. Some of the most commonly outsourced business processes today include the following:

• Tax transactions and claims
• Accounting bills
• Customer support
• Telemarketing
• Medical transcription
• Market research and analysis
• Language translations
• Logistics
• Banking and finance
• Human resource