The shoe manufacturer, Nike, only makes air pillows of its shoes - the rest is outsourced from its vendors; Honda, the auto major, is one of the biggest examples of outsourcing concepts. The auto major sources nearly 80 per cent of its spares and components from various vendors. Welcome to the new era of manufacturing where it is no more fashionable to manufacture. The recipe for success is outsourcing and more of outsourcing.

“When price is fixed and margins are getting squeezed, outsourcing is coming in handy for big enterprises to cut down their production costs,” says a senior official at an engineering company. More so when transportation costs are on the downside in recent times, he adds. According to Gary D Eppen, Professor of operations Management, University of Chicago, the outsourcing trend has set in because of the falling operational costs in the light of globalisation. Eppen was recently in India to talk to entrepreneurs on the opportunities in outsourcing business.

While the trend (outsourcing) is yet to catch up in India in a big way, the Indian industry promises to follow the global example. The pioneer has been the auto sector which has followed the example of the other markets such as Japan and the US. The auto component major, MICO for instance, sources a good percentage of its components from its vendors. Even in the US, it is the auto sector which out sources to a large extent.

According to auto industry sources the relatively large outsourcing is mainly because of the number of components and parts involved in the business. "It would be more viable for an auto major to focus on assembling and branding its product rather than worry about the smaller components' production," says a source at a machine tool company.

The new phenomenon can also be attributed to the growing specialisation and entrepreneurial mood in the country. Fabmart, the first e-tail store in the country manages its operations with a skeleton staff strength of around 20 people while outsourcing close to 80 per cent of its business requirement. Fabmart's mantra is that customer is not worried about the back end operations of a business. So, it makes sense for businesses to focus on building the brand with a focus on customer. R Sridhar, a management consultant in Bangalore, fully agrees with this logic and adds "the present business game plan is to focus on your core strength and leave the rest to others."

It is not just the auto components and spare parts which are getting outsourced. Even the designs of products and logistics are in the outsourcing list. India Life Pensions, a Bangalore-based company actually manages the pension funds of various companies across the world with its base in Bangalore. The company keeps a tab on the accounts of every employee, plans investments on behalf of various employers across the globe and pays the employees on behalf of their employers when they retire.

The trend seems to have caught up with the banking sector too. Most private banks are comfortably looking at outsourcing their marketing staff since marketing hasn't been their cup of tea! Most banks today are using the direct selling agency route for pushing their volumes. What started with the aggressive ICICI is more visible in other banks too.