The When’s, The Why’s, and the How’s of Outsourcing. Many companies outsource parts or all of their business operations to help gain a competitive edge in the market or to simply fulfil a need the company is unable to perform in house. The most popular reason for outsourcing is simply time. It can often be less costly to pay someone else to do work that would take you far more time. Outsourcing is simply contracting or subcontracting for activities, personnel, time, and/or facilities outside of your company or department. It can be an individual or company that manages or performs functions and/or activities in which they are contracted (paid to do).
Outsourcing has become a huge trend in human resources over the past decade along with Global outsourcing, using organizations in all areas of the world to some complete some aspects of a company’s work. Let’s get into the need for a company to outsource.
The When & Why? When should you outsource? This is going to vary company to company but here are some best examples:
- When you need a specialized skill or service that doesn’t require full-time support.
- Is there is a competitive edge that you gain by doing the work in-house? If no, it can be outsourced.
- Is it a commodity? Something else someone else can do better and more efficient.
- Is the cost of the service less expensive than it would take you in time/money/manpower to complete in-house?
- It’s always a cost/time/money valuation. When the time it takes you to complete tasks (that you could train someone else to complete) prevents you from accomplishing core work that make your company money, it’s time to consider outsourcing.
- Things that are operationally critical but not your “secret sauce”. Let’s take iConfect(www.iconfect.com) for example. If Andera Jackson, CEO is distributing her products in 5,500 locations across the country, she most like won’t care what company delivers them as long as it meets her time deadlines, refrigeration requirements, and her budget. This saves her from having to buy trucks, hire people, and worry about delivery. But the mix of ingredients that make her sweet and savory items so delicious, she may most likey wouldn’t outsource. Now can she outsource her “secret sauce”? Yes, with proper NDA’s and legal clauses even your secret sauce can be outsourced.
- Things that are rote and common services, such as:
- Information Technology services
- Maintenance: Cleaning, lawn care, pest control, etc.
- Printing services
- Graphic Designers: logos & professional publications
- Payroll & Accounting services
- Marketing: Social Media management and other marketing services.
- Customer Service/Helpdesk: Provide FAQ’s and instruction on how contractors should service your clientele.
- Personal/Virtual Assistants: They can do some of everything that you need from administrative tasks to managing your social media platforms.
- Perform an assessment of your company operations. From first customer interaction to product delivery, maintenance, and follow-on services. Look at every aspect of your business then…
- Document the tasks or services that you believe can and should be outsourced
- Run the numbers! Conduct a cost/time analysis to see if it makes sense. If the answer is yes?…
- Establish the goal, timelines, and deliverables
- Search for companies that can fulfill your business needs, timelines, quality, and budget.
- Interview at least 3 companies.
- Know their value systems and product guarantees.
- Negotiate services. If yo8u have a large operation, seek volume discounts.
- Develop your Contracts including to include in depth deliverables based on time and quality, etc.
- Re-evaluate. Each year re-evaluate your need for outsourcing. If an activity or service is increasing in volume, re-assess if it would be more cost-effective to bring that talent in-house.
- Provide feedback to your vendors. They should know how they are performing and if you are satisfied with their service. If you are not, give them an opportunity to improve before abruptly leaving.
The Top 5 Outsourcing Destinations to Watch according to Computer Weekly:
- Argentina Argentinais seen by many companies as an ideal location for outsourcing. For one, it has low market and labor costs. With budgets tighter than ever, this is a big plus for many UK firms. Argentina also has a large labour pool, which is highly literate, both in terms of IT and language. Spanish is the first language of Argentina, and English is the second. The labor force includes a solid base of technically savvy and well-educated workers, particularly programmers, ready for work at a reasonable price. The country developed its IT talent during the dot-com boom of the Nineties. During this time, Argentina supplied around 65% of the design and implementation work for most of the regional Internet start-ups. Argentina also boasts a robust, deregulated telecoms network, and an abundant supply of office-space. The Latin American country is also attractive because of its cultural similarities to the West.
- Bulgaria Bulgaria is climbing as an outsourcing center, catching up on more established centers such as the Czech Republic. Amongst the Eastern European outsourcing locations, Bulgaria competes with Slovakia, Hungary, Poland Russia and the Ukraine. Eastern Europe is attracting many Western Europe firms looking to outsource, because of the region’s cultural affinity with the West. Like the Czech Republic, Bulgaria’s relatively low costs and strong education system are key factors in its favor. Bulgaria has benefited from improvements in its business environment, as a result of reforms carried out to qualify for European Union membership. Bulgaria joined the EU on January 1, 2007. Bulgarian outsourcing vendors excel in the more challenging programming technologies, with developers being well versed in C++, Java and open source. Bulgaria also has a good mix of high skills, fairly low labor costs and good production quality.
- China Along with India, China is still a top outsourcing domain, and is growing in popularity. Its IT sector is also growing and developing. China provides an excellent supply of low-cost outsourcing resources – labor in particular – as is the case with India. Secondly, if western companies are dealing with customers or companies who have Asian headquarters, there is a language and cultural advantage to outsourcing to China. For example, in cities like Shanghai, engineers tend to be multi-lingual, speaking Japanese and Chinese. However, when it comes to the English language capability of Chinese workers, this tends to be unsatisfactory for many western businesses. China also lacks good protection for intellectual property, so software or products could be duplicated with little comeback. Another consideration is that China is several time zones away for western companies, particularly US firms, which can make communicating hard work.
- Egypt As an IT outsourcing region, the Middle East and Africa is growing as a home to remote services for global companies in Europe, Asia and the US. Egypt, Jordan and the United Arab Emirates (UAE) are all on the rise, along with Tunisia, Ghana, South Africa, and Israel – with its extremely skilled programming workforce. Egypt, in particular, claims to have one of the largest talent bases of any country in the Middle East. It is home to an increasing number of outsourcing centers operated by multinationals. For example, Indian outsourcing giants Satyam and Wipro have expanded by setting up outsourcing centers in Egypt. Egypt is recognized for its young working population, large multilingual workforce, solid infrastructure and competitive cost structure. The Egyptian government also offers tax incentives to outsourcing prospects. Egyptian outsourcing firms claim that their language skills and low labor cost would be able to compete with India in terms of handling outsourced work.
- The Philippines Southeast Asian nations are continuing to build up an outsourcing presence. The Philippines is one of the faster growing countries, vying with Malaysia, Thailand, Indonesia and Singapore. The Philippines has a blossoming IT outsourcing sector, and the lowest wage and telecoms costs of all the outsourcing countries. The Philippines is strong in back-office outsourcing, in addition to its traditional contact center services. Back-office firms provide finance and accounting, HR management, payroll, logistics and publishing. Philippine outsourcers also specialize in application development and legacy application maintenance, and are well versed in Java and .NET. Recent currency appreciation has driven wages up by a third, but the country has managed to stay cost competitive despite this. The Philippines has a close cultural affinity with the US, and workers have a good command of English. It is a popular choice for companies that want to move their low-level maintenance work offshore.
For the Pro’s and Con’s of each click here to view the full article: http://www.computerweekly.com/feature/Top-five-outsourcing-destinations-to-watch
Until next time,