MODULE – 1 What is Outsourcing? Outsourcing is the contracting out of an internal business process to a third-party organization. The practice of contracting a business process out to a third party rather than staffing it internally is common in the modern economy. The term "outsourcing" became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always. always.
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The definition of outsourcing includes both foreign and domestic contracting , includes offshoring offshoring,, which means relocating a business function to another country .
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Financial savings
from lower international labor rates is a big motivation for outsourcing/offshoring. The opposite of outsourcing is called insourcing insourcing,, which entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration. integration. However, a business can provide a contract service to another business without necessarily insourcing that business process. Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with comparative advantages than it is to produce the good internally. An example of a manufacturing company outsourcing would be Dell buying some of its computer components from another manufacturer in order to save on production costs. Alternatively, businesses may decide to outsource book-keeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant. The process of outsourcing generally encompasses four stages: 1) strategic thinking, to develop the organization's philosophy about the role of outsourcing in its activities; 2) evaluation and selection, to decide on the appropriate outsourcing projects and potential locations for the work to be done and service providers to do it; 3) contract development, to work out the legal, pricing and service level agreement (SLA) terms; and 4) outsourcing management or governance, to refine the ongoing working relationship between the client and outsourcing service providers.
Concept & Scope of Outsourcing Outsourcing to some is not a pleasant term but this concept is used throughout society not only in our country but the world. Companies today are looking for ways to survive but how they accomplish accomplish this is open for discussion. There are many products being manufactured today in the private sector and many of them have a large amount of components which must be made and installed to complete the end product. Outsourcing can be a good thing for the economy but it can also be a bad thing. Companies today both large and small do not have the capacity or expertise to manufacture every component of an end product they are getting ready for sale. This is a good thing as this need creates the need for additional jobs provided the market is good for the product being manufactured and assembled. The key to outsourcing is choosing the resource that can provide the quality product or service in completing an end product.
The products of today seem to increasing today more than ever in conjunction with technology advances. Outsourcing amounts to companies using suppliers to provide the necessary expertise and/or product to be assembled into an end product. The supplier system in the United States and around the world creates an environment where jobs may be sustained or increased dependent upon the demand for a product or service. How and where these jobs are located is what is creating concern over this concept. To begin the decision to outsource specific operations or functions must be based on sound judgment not just a cost factor though cost is an integral part of an outsourcing decision. There is nothing wrong with this concept but when companies choose this option, it must for the right reasons. The subject of outsourcing and the decision to use this concept is different for each company. The justification and support is as different as there are products and services. It is necessary to evaluate several details or conditions before deciding to outsource operations/functions.
Outsourcing is not for everyone and
companies sometimes lose something in the process when they incorporate this concept. The main purpose of outsourcing is in effect to reduce costs and increase profit. This is not a bad thing. Companies must make money to survive in the world economy as it is today. While it is up to each company and their management to make the decision for outsourcing, there is an impact to the employees and the consumer when outsourcing is used. Companies make a variety of products for which they do not have all the resources or talent in house to complete them for their final product. This is where the concept of outsourcing comes into play. One last point to make is that I am not against the concept of outsourcing but specific criteria must be established to provide a basis for the decision to outsource. Before outsourcing the resources of a company must be examined to determine if the capability exist within the company to provide the necessary capacity and expertise. If these conditions are not present and cannot be developed, then outsourcing may be necessary. This is an aspect that should be examined before an outsourcing decision is made. Granted there are many complex issues and factors involved in the manufacture of many products consumers want. Outsourcing is not for every company but it is a necessary option for others.
Significance of Outsourcing 1.
Get access to skilled expertise One of the primary reasons why a business may want to outsource a task is when it requires skilled expertise. This skill set may not be a core competency of its business. To allow you to focus on your core mission in providing a high quality product and service to your customer what makes sense is offshoring the task to people can perform it better. Moreover, as a double whammy, you not only spend less on employee trainings and save precious man-hours but cut costs as well.
Outsource2india has dedicated teams to provide wide range of outsourcing services, which help us offer specialized business process outsourcing solutions to clients globally. We leverage on our multidomain expertise and skills across variegated industry verticals and technologies to achieve superior quality and unmatched proficiency in the outsourced process. 2.
Focus on core activities Workload increases with additional non-core functions and the quality of your core activities suffers as your business grows. Outsourcing in such scenario to a third party plays an important role by allowing your key resources to focus on primary business tasks.
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Better Risk Management Outsourcing will allow you to share any associated risks with your outsourcing partners there by reducing your burden. For example - by outsourcing to a competent outsourcing partner you reduce the risk involved in having the same task done in-house by staff that may not be as competent in that field.
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Increasing in-house efficiency After you allocate tasks to your outsourcing partner, they share the work load of your employees. This allows you to develop your internal task force and use them more efficiently.
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Run your business 24X7 Offshore outsourcing to a country like India, which is on a different time zone, gives you the added advantage of making full use of your 24 hour day. Since your night is their day, your outsourcing partner can take over and continue your work even after your employees go home and to bed. They can complete critical tasks and send it back for your review the next day. So the benefit of outsourcing here is that you get more work done in a day, increasing your overall productivity. A 24X7 customer support is a dream come true for your customers and this can be fully realized through offshore outsourcing.
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Staffing Flexibility Outsourcing certain independent tasks, allows your business to maintain a financial flexibility when there is an uncertainty in demand. You can scale up or down comfortably. At a much lower cost, offshore outsourcing provides additional benefit of running your business in full throttle even during off season and holiday months.
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Improve service and delight the customer
Your outsourcing partner, with their skilled expertise will produce quality deliverables faster, increasing your turn around time to the customer. With on-time deliveries and high-quality services your customers will be delighted! Outsourcing can help you benefit from increased customer satisfaction and thus creating a stream of loyal customers. 8.
Cut costs and save BIG! All the benefits listed above com e with the bonus benefit of lower cost and big savings! When you outsource services like medical billing, call center and teleradiology, etc. to a low-cost country like India or Philippines, you are getting access to quality services that are offered at a much lower cost (You can save up to 60% costs)! Maintaining an infrastructure can be an extra burden for some businesses, which outsourcing can remove. Outsourcing your business requirements to a trusted vendor can help you save on the capital expenditure, time, and extra efforts of your personnel. Additionally, you are no longer committed to invest on employee training, or purchasing expensive software, or investing in latest technologies. All this add up to higher returns in the longer run.
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Give your business a competitive edge The ultimate benefit of outsourcing is that it helps your organization gain a competitive edge in the market. Through strategic outsourcing to an outsourcing partner, you are not only providing your customers with best-of breed services, but increasing your productivity while managing your in-house resources intelligently. Outsourcing can help you surpass competitors who have not yet realized the benefits of outsourcing.
10. See an overall increase in your business Outsourcing shows an increase in your productivity, customer loyalty. level of quality, business value, profits, and much more.
Challenges in Outsourcing The idea of importing manpower and services from other countries has been around since the advent of international trade. However, the essence of outsourcing as known today allows the global workforce to be connected in many more ways. However, there are some outsourcing barriers that we have to confront before we can regard it as suitable to our business. The payoffs of outsourcing are opposed by some hindrances. An important consideration is the economic and political condition of the state. Third world countries have a high chance to have
unstable governments. Furthermore, the economic policies of these nations can switch from one political cycle to the next. Thus, there is a level of uncertainty that increases the risk for businesses who want to invest in outsourcing. One more considerable obstacle is the language gap. Because of this challenge, not many nations are eligible for outsourcing. Developing nations that are well-versed in English like the Philippines and India are perfect candidates. Companies should look for subcontractors that totally complies with the skill-set that they require. One more outsourcing barrier is a nation's current infrastructure. This involves the legal system, banking system infrastructure, and the telecommunications infrastructure that coordinates everything. Without a highly-developed infrastructure, the cost of subcontracting and the risks that are part of this kind of investment can be larger than predicted. Once all the macro-challenges are considered, businesses will need to deal with other outsourcing challenges like cultural gaps, ability to integrate operations, training, and knowledge transfer. Operating with outsource partners requires companies to coordinate their local operation to conform with them. Aside from all of these, there are also active challenges that requires consideration. Among these are security risks, human resource management, time-zone, management challenges, and many more. Outsourcing is not for all. There are specific situations when outsourcing challenges outweigh the advantages. At the end of the day, you have to decide whether outsourcing is good for you or not.
MODULE – 2 In-source Vs Outsource Define insourcing and outsourcing first Before deciding whether insourcing or outsourcing is the best option, it is important to first define business goals. A poorly defined objective may result in neither insourcing nor outsourcing being beneficial. Though insourcing may look like a straightforward option, businesses need to look closely to see how difficult it is to implement. Insourcing makes sense when the business requirement is only temporary or where no significant investment is involved. Insourcing is also an option for those who want to outsource but are wary to do so. Insourcing may give you a preview into how
outsourcing can work. Done well, insourcing may help you build a team of skilled people, though it might take more time than outsourcing. Insourcing can also help smaller businesses and startups that have little or no experience with outsourcing. Outsourcing is a clear winner when businesses need to cut costs while still requiring expert personnel. It was once considered a luxury only larger companies could afford. Today, companies of all sizes use outsourcing to let go of managing non-core functions while saving a lot of money in the process. Outsourcing also gives you access to specialized skill sets of resources and processes that insourcing simply cannot match —not without significant costs. This is perhaps one of the most important factors for businesses choosing to outsource. Though there are many outsourcing vendors, it is important to assess potential vendors before shaking hands on a partnership. Doing a little homework before choosing your outsourcing partner can lead to long term gains and help you build a long-term competitive advantage for your business.
On-shore, near-shore & off-shore – why, when & how?
Companies may choose to meet operational needs by outsourcing their contact center operations to onshore, offshore, or near shore locations.They base their decisions, in part, on cost comparisons, proximity to their business location, and language or cultural considerations. It would be helpful to begin by defining the terms “onshore”, “offshore” and “near shore”. Onshore Outsourcing: Outsourcing operations of the company to another company located in the home country or region. Companies can reduce labor costs somewhat and benefit from highly skilled labor with little or no language or cultural barrier, but the cost of such operations is high compared to offshore or near shore locations.
Offshore Outsourcing: Outsourcing the operations of the company to other companies that are located in a foreign country, and most likely have a different language and culture. Offshore outsourcing offers benefits like higher cost savings and access to highly skilled labor. Near Shore Outsourcing: Outsourcing the operations of the company toan adjacent or nearby country having similar culture and language skills. Near shore outsourcing offers some cost savings over onshore and has the added benefit of proximity for more frequent site visits, while retaining a highly skilled labor pool.Comparative Aspects of Onshore, Offshore and Near Shore Outsourcing: Cost-Savings: One of the most important reasons for companies to consider outsourcing all or someof their operations to other companies is cost savings. The direct labor costs of offshore locations can be much less thanonshore locations. Other aspects,such as travel costs, can be efficiently managed by the companies to improve the bottom line. However, some companies may consider near shore options due to other benefits, such as similar culture and easier travel to near shore locations. But with depreciation of currencies in some offshore countries, companies are largely considering offshore outsourcing. Speed of Execution: The speed of execution depends upon the complexity of the campaign and the firm handling the outsourcing project.The availability of resources and the ability to define requirements clearly are also two key dimensions that can affect the speed of execution. Due to lower direct labor costs, offshore firms have greater flexibility in piling on resources in advance of a project, and in beginning implementation more quickly than an onshore firm; onshore firms cannot afford to maintain idle resources and they must hire and train agents for new project implementation. Onshore firms tend to be more efficient in requirements collection and definition due to a lack of language and cultural barriers. Offshore firms can also handle requirements communication, but they must work to overcome language and culture barriers. Quality and Expertise At most contact center locations, whether onshore, offshore or near shore, there is an abundance of high quality professionals with domain-specific expertise. While language and cultural barriers can impact the quality of service provided, this gap can be closed through specialization and quality control.
Execution Risk Every outsourcing project faces execution risk. This risk is increased when projects are outsourced to near shore or offshore locations. However, execution risks can be mitigated and greatly reduced through both a risk management plan, and an effective management plan. Businesses contemplating outsourcing their project to onshore, near shore, or offshore firms must make a decision after comparing all of the benefits offered. The choice made by the businesses will depend completely upon their own unique needs and goals.
Types of outsourcing in various sectors
http://www.wisegeek.com/what-are-the-different-types-of-outsourcing-services.htm
