Understanding Third Party Outsourcing

According to Wikipedia, “A precise definition of outsourcing has yet to be agreed upon. Thus, the term is used inconsistently. However, outsourcing is often viewed as involving the contracting out of a business function – commonly one previously performed in-house – to an external provider. In this sense, two organizations may enter a contractual agreement involving an exchange of services and payments.”

Probably the most well known form of outsourcing, or at least the form of outsourcing that brought attention to the practice is inappropriately termed offshore outsourcing. Outsourcing does not have to be conducted with companies or freelancers who are in fact offshore.  Such terms as near shoring or multi sourcing and strategic outsourcing best describe the way the industry has evolved. 3rd party Outsourcing has advanced from being a value protecting measure to becoming a value-creating measure.

Make no mistake about it. Near shoring or outsourcing is an industry that is vibrant, growing at an amazing rate and saving businesses billions of dollars every quarter. Outsourcing is here to stay.
Third party outsourcing has tremendous advantages for both the buyer and the provider. Receive project descriptions from buyers and posts these clarified projects for providers to review and then make a bid. After receiving the bids, the buyers review them and engages in an interview through the third party.  The interview may question experience, reliability, availability and request references of various sorts.
The buyer must feel comfortable.  Some outsourcing is more complex, especially when it comes to manufacturing or other fields.

The most common forms of third party outsourcing involve information technology (IT), application outsourcing and database management and administration and related topics.

Application Outsourcing generally refers to the support, preservation and development of existing services.  Today, when company’s have unprofitable, unproductive and inconsistent services, freelancers are called upon to create responsiveness and revamp the existing service.

Information Technology revolves around the utilization of electronic devices for the accurate processing of data.  Usually these services are outsourced to gain superior technology and computing skills.  Freelancers in Information Technology usually have skills in business analysis, data manipulation, networking and software design.

Database management or administration skills are outsourced when companies lack the ability to perform IT functions. The enterprise may not have the necessary technology, personnel or time to provide these necessary functions.

In any case, projects are described in detail before posting it for providers to consider. Once the provider is selected by the buyer, a deposit is posted as security.  For large scale projects, the financing can call for installment payments as the project develops but usually the financial transactions are completed in extremely reliable time frames and the parties can either go their way or continue with another project.

The process has all the ingredients of a successful supply and demand system. The competitive nature of the third party system saves businesses money and provides freelance companies and individuals a fair and handsome income.  In the end, successful outsourcing is a win-win-win situation.  What could be better?

Article by: Hiland B. Doolittle