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What is
Outsourcing
Outsourcing is the process by which a company contracts another company to
provide particular services. These services/ functions would be otherwise
carried out in-house, by the company’s own employees. Outsourcing is
becoming more and more popular in today’s business environment, and most
companies outsource some work or other.
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Outsourcing-Answers to Criticism
As the outsourcing juggernaut rolls on,
business analysts have come up with arguments favoring and criticizing it.
Cost savings, flexibility, access to specialists in each category of work
etc are all factors that help businesses. However critics raise issues like
worker security, information security concerns and quality discrepancies.
Let us examine how these issues are addressed.
- Offshore Outsourcing
Offshore outsourcing has emerged a
very important and popular business practice in the new millenium.
Organizations across the world look at outsourcing as a way to save costs
and resources. Most of these organizations from the western world give India
top priority in their offshoring negotiations.
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Why Outsource
Different firms have different specific business situations that call for
outsourcing. Some organizations take to outsourcing just because they are
hard pressed for time, or because they believe outsourcing can save them
money. Careful planning and assessment of one’s requirements are absolute
musts for any organization before it goes for outsourcing. Here are some of
the ‘right reasons’ for which a business may consider outsourcing.
- Benefits of outsourcing
Many organizations from different parts of the world are outsourcing work
these days. Opening up of the economies has made outsourcing accessible to
companies all over the world. Businesses in the developed countries
regularly go for offshore outsourcing, thus taking advantage of lower labor
costs and convenient currency exchange values.
- Criticisms
As outsourcing has gained worldwide
popularity for its cost effectiveness, companies have also found several
other reasons why outsourcing is beneficial. However the outsourcing trend
is not without its share of critics. Let us examine some of the common
issues raised against outsourcing.
- Know
about outsourcing
Let us start at the beginning with a definition of what is outsourcing.
Outsourcing can be described in many ways, but at its simplest it is
allocating work to a third party. Outsourcing has applications in several
industries. However in the case of IT outsourcing, you can either outsource
the entire management of all your IT requirements or a small, simple part at
the other end of the spectrum. For instance it is quite common for companies
to outsource services like data storage or disaster recovery to service
providers specializing in these.
- The
price
In this article we will examine the different options to structure the
payment for an outsourcing contract. Unit pricing, fixed/ variable pricing,
cost plus profit, performance-based pay, profit/risk sharing and bundling
are the most common approaches. The choice of the supplier as well as the
pricing model depends on the business objectives of the buyer company.
- Choosing
the vendor
There are several aspects to the decision making process about outsourcing.
In this article we will look into the choice of vendors.
- Time
Factor
Apart from the choice of vendors and pricing method, it is important to
choose your contract period well. In this article we will examine the
factors associated with time.
- Troubles
Everyone who has attempted or conducted a study about outsourcing will agree
that outsourcing is difficult. Outsourcing relationships have high failure
rates as of now though experts aren’t unanimous about the exact rate
(could be anything from 40 to 70 percent).
- Negotiation
tips
The principles for negotiations are the same as the things you need to keep
in mind while choosing a vendor. Identify your priorities and make
trade-offs accordingly. The service provider will obviously aim at making
the maximum profits at the minimum of risk. Therefore the buyer needs to be
clear about what you want and keep that in focus while negotiating terms
with the vendor.
- Strategic
Outsourcing
Outsourcing has become a highly
popular business strategy in the current decade. Businesses take to
outsourcing for different reasons like cost savings, access to latest
technologies and specialists and flexibility. While outsourcing has helped
many companies to reach the top, it is not advisable to go for it without
studying the scenario. Businesses need to think over their requirements and
plan properly before they approach vendors for outsourcing agreement.
- Outsourcing-
Guidelines
Organizations often feel confused and
overwhelmed when they go for outsourcing the first time. It is quite natural
to have apprehensions about depending on an outsider to carry out important
tasks. A good part of the discomfort comes from not having good awareness
levels about the outsourcing process. Here is a quick lowdown on the most
important points to remember while outsourcing.
- Different
Types of Outsourcing
Outsourcing is the process by which an
organization contracts with another individual or company to get some of its
work done. Viewed this way, most organizations go for some kind or other of
outsourcing. Generally it is non-core aspects of the business that are
outsourced.
- How
to Outsource to India
Most outsourcing experts and
consultants would name India as “the place” for outsourcing. Even those
who do not count India as the topmost outsourcing destination do not fail to
see the sway this country has in the outsourcing industry. A World Bank
supported study in the US seems to suggest just this. So have reports from
consultants like McKinsey and Forrester.
- Types
of Outsourcing
There are many different kinds of work
outsourced. However all of these outsourcing services fall in two broad
categories, technology services outsourcing and business process
outsourcing. Let us examine what each of these categories mean.
- Success
Tips for Offshore Outsourcing
Offshore outsourcing has become a
business tool every organization turns to at some time or the other, for
different reasons. While offshore outsourcing has benefits, it is not a
cakewalk to get your work done through a company that operates from a
different country and culture. Given below are some tips for successful
offshore outsourcing.
- Make
Profit with Outsourcing
When a business is growing/ expanding,
it often finds that it can’t possibly handle all the products, services
and related work on its own. The company may start offering more products
and services. It is often short of time and feels the need for hiring more
people to do some of the work. Outsourcing may be just the right thing to do
in such a situation.
- Offshore
Outsourcing Tips
What is the perfect way to go about
offshore outsourcing? There are no definite answers to this question. What
works in one situation might prove to be disastrous in a different case. The
overseas business market is currently highly competitive. Companies and
people have to work with people who they know very little of. Selection of
associates can be very tricky in such a situation. Even seasoned players
make mistakes at times and there are several aspects that need to be studied
well before one goes for offshore outsourcing. However here are some tips
that can help you with the selection process.
- Why
Offshore Outsourcing
Offshore outsourcing has established
itself as a business trend for many years now. Offshore outsourcing has
gained popularity mainly for two reasons, namely the flexibility it offers
and the cost advantage. Each sector and company experiences flexibility in
different ways, but offshore outsourcing has overall been a right step
towards meeting these diverse needs.
- How to Have a Successful Outsourcing Relationship
The first thing to understand when you consider an outsourcing deal is that it is going to be a long-term arrangement.
The foundation to a successful relationship has to be laid at the very start, at the stage of negotiations.
Here are some of the most important steps that have helped companies in establishing a successful relationship.
These practices are favored by companies from major outsourcing destinations like India.
- Offshore Outsourcing - Benefits
Lower costs and flexibility are the two main driving factors behind the outsourcing business. The term flexibility has a range of meanings as it has several aspects for the different services. All in all it is flexibility that makes it possible to meet the different requirements and demands. Let us examine some aspects that offshore outsourcing
improves.
- Outsourcing: The Most Important Questions
Outsourcing work is an important business decision that can make or mar your prospects.
There are several questions and issues the company needs to address in the decision making process.
Apart from integrity and efficiency, the client and the service provider should be able to establish
an effective communication system. Here are some of the important components that help you to take the right decisions.
- Why Outsource
Work
Many businesses, big and small alike, go for outsourcing these days. There are many benefits derived from outsourcing, but the most important one is that outsourcing enables one to hand over some of the tasks and concentrate on those areas where the core team needs to concentrate. When a business grows, there come stages when the current set up is not equipped to handle all the work. At the same time, the company may not be in a position to hire permanent
employees. Outsourcing thus becomes the tool to bridge the gap.
- Outsourcing
Defined
Despite receiving a lot of attention in the last decade, outsourcing is still a term many people do not understand fully. Let us, in this section, try to examine some of the basic factors that are common to all types of outsourcing and thus derive a definition.
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Outsourcing Process Management
The success of an outsourcing arrangement depends entirely on how the entire process is managed. It requires thorough planning right from the beginning, but this is an area that has not been given due importance yet.
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Offshore Outsourcing- Ten Steps to Success
Here are a few must-follow steps when you go for offshore outsourcing. These steps are very useful in selecting a suitable vendor and planning out the entire
process.
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Outsource IT the Smart Way
Information Technology is big business for financial services companies, worth several billions. If we look at the global picture, the annual spending on IT requirement of companies stands at about $350 billion. The costs could be for proprietary, custom made or packaged software and hardware services. Almost 35 percent of this spending goes to third-party service providers. Thus IT is an important tool for these companies to leverage their competitive edge, and it is crucial to find simple and cost effective methods. Of all the different areas involved in offshore software development, the licensing part is generally the most expensive and troublesome area. Here are a few tips to recognize and therefore avoid unnecessary costs.
- Basic
Steps to Outsourcing Success
There are a few fundamental steps to ensure the best results for your outsourcing venture. These strategies help to reap maximum benefits as also avoid pitfalls and complications.
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How
to Outsource Your Business Process Management
Business process outsourcing
market has witnessed exponential growth in the last decade, going by
research figures- the market stood at $19 billion in 2004, and the
projected worth for 2008 is at $146 billion. While many companies
have been successful at outsourcing, outsourcing has presented
several problems to many others.
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Communication
and Culture Tips in Offshore Outsourcing Relationships
Many offshore outsourcing and
other business arrangements run into difficulties due to
communication problems. The trend is very prominent in both
situations- whether managers are responding to formal surveys or
they are citing specific cases.
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Communication
Effectiveness in Outsourcing
A good part of the communication in
outsourcing relationships is achieved at the stage of developing the
contract and imparting the training. This stage is crucial, as it is
here that the service provider's team members get to understand the
specifics of the work, and also the client learns about the
techniques, technologies and processes the vendor is going to
employ.
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Lower
Risk in Business Process Outsourcing
In a previous article we
examined several of the risk factors associated with Business
Process Outsourcing. Many of these risk factors are applicable to
both offshore and onshore outsourcing. When a company decides to
outsource, it often ensues layoffs. Now consider the scenario where
the outsourcing deal does not yield desired results.
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Penalties
and Incentives in Outsourcing
It is a time honored approach
to motivation to punish bad behavior and reward good behavior.
However before we set out to mete out rewards and punishments, it is
important to define expectations and parameters well in advance and
also specify consequences for not meeting them. If managed well,
this method can go a long way in managing an outsourcing contract to
make it a mutually beneficial arrangement.
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What
are the Skills for Managing Projects?
Imagine a software project
situation, where you have everything it takes to win- an extremely
capable manager and team, excellent tracking, and finally all the
important milestones and deliverables get completed on time and
within budget. But the outcome is something totally unexpected-
users are very unhappy about the product and as a result the project
gets cancelled. Unlikely as it might seem, this scenario is not
really such a rare event.
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How to find a suitable outsourcing vendor
Finding the right kind of outsourcing vendor is very critical to the success of the company that is outsourcing. The outsourcer should have a clear mind as to what to expect from the vendor. Great care should be taken while engaging a vendor. A few aspects have been described below to guide the outsourcer in his quest for the right vendor.
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Business Process outsourcing
Generally, we connect BPO with outsourcing. However, there is more to a BPO than mere outsourcing. It is an Information Technology Enabled Service. This makes it distinct from outsourcing. Here, either an old technology is used or a new one developed and applied as a means of improving the process. There is a constant effort to improve the process by newer and better means.
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Risks of outsourcing
Outsourcing has generated much controversy in recent times for various reasons. Outsourcing has been resorted to with mainly for maximizing profits. Before deciding on outsourcing, the outsourcer should examine in detail the various problems that are likely to crop up. Some of the problems can be easily straightened, while others can result in the outsourcer finding itself in a no-way out situation.
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History of Outsourcing
Outsourcing is not a new phenomenon, as many of us believe. Many thousands of years ago, our ancestors had understood the need for outsourcing .They realized that it would be impossible for them to fulfill all their needs by themselves, but they would have to depend on someone else to serve them.
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Risks
of Outsourcing Financial Services by banks
Many banks use a third party to perform certain activities that would have been normally performed by the banks themselves. They outsource some activities to a party, which may or may not be affiliated with the outsourcer bank. Outsourcing of financial services is a broad based activity that includes processing of loans at the original stage, credit card processing, document processing, marketing and research, supervision of loans, data processing and back office activities.
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The Advantages of Outsourcing
Outsourcing is one of the most discussed issues today. Many believe that outsourcing has led to increase in unemployment in countries like the U.S.A. However the benefits of outsourcing out weighs its disadvantages. We shall now discuss the advantages of outsourcing both to the country that is outsourcing and to that, which is performing the job of outsourcing.
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The various approaches to outsourcing
It is important to understand the various approaches to outsourcing, so that the most appropriate one may be chosen.
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Tips for Successful Outsourcing
Outsourcing has proved a boon to many companies. However, there are some inherent problems, which can be avoided if one employed some care. The vendor-outsourcer relation is meant to be a long-term one.
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The Success of Outsourcing in India
Outsourcing began as as cost-effective measure. Now, India has much more to offer in terms of improved productivity and quality. Hence, more than 82% American companies prefer to outsource to India.
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Risk Management Practices for banks that outsource services
Banks that outsource are exposed to many risks. They have to put in place many safe guards to protect the interest of their customers.
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Measures to stem attrition in BPOs
Attrition is perhaps the single largest problem facing the BPO industry today. Attempts are being made to check the number of people leaving the industry. A great deal more needs to be done.
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Knowledge Process Outsourcing
Knowledge Process Outsourcing (KPO) is a form of Business Process Outsourcing. However, it is not mere business processing, but adds intellectual value to it. .
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Challenges Faced by the BPO industry today
BPOs have proved a grand success. However, certain problems have cropped up in the process for which long-term solutions are necessary.
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Legal Process outsourcing
Legal Process Outsourcing is now being viewed as an industry by itself and not a just another activity of Knowledge Process Outsourcing. The idea here is for client law firms or organizations (usually in U.S. or Britain) to obtain legal support from service providers that are usually located in distant places like India.
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Pros and cons of Legal Process Outsourcing and the Indian scene
Legal process outsourcing has become popular for many reasons and India is regarded as the best destination for outsourcing of this kind. Indian service providers offer legal support in the forms of research, document reviews, drafting of documents, making applications for patents and various paralegal and administrative tasks.
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The growth of near-shore outsourcing
Outsourcing destinations like India and china are now facing stiff competition from Eastern European countries like Romania, the Czech Republic, Slovakia, Ukraine, and Russia, and North African countries like Morocco. Eastern European countries are the clear favorites in the list for near shore outsourcing by countries in Western Europe.
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Outsourcing-Negotiation Tips
The principles for negotiations are the same as the things you need to keep in mind while choosing a vendor. Identify your priorities and make trade-offs accordingly. The service provider will obviously aim at making the maximum profits at the minimum of risk. Therefore the buyer needs to be clear about what you want and keep that in focus while negotiating terms with the vendor.
-
Outsourcing- The Price
In this article we will examine the different options to structure the payment for an outsourcing contract. Unit pricing, fixed/ variable pricing, cost plus profit, performance-based pay, profit/risk sharing and bundling are the most common approaches. The choice of the supplier as well as the pricing model depends on the business objectives of the buyer company.
-
Outsourcing
- Time Factors
Apart from the choice of vendors and pricing method, it is important to choose your contract period well. In this article we will examine the factors associated with time.
-
Outsourcing- Troubles
Everyone who has attempted or conducted a study about outsourcing will agree that outsourcing is difficult. Outsourcing relationships have high failure rates as of now though experts aren’t unanimous about the exact rate (could be anything from 40 to 70 percent).
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