outsourcing – you are doing it right

Outsourcing – Doing it right!

In this dog-eat-dog world, it is crucial for business to adapt and apply. In order to stay ahead of your competitions your methods has to be very selective and up to date (e.g. using social network for marketing). Offshore outsourcing is one such method. With the right vendor, outsourcing has a track record of proving itself as an essential ingredient to stay ahead. It is the practice of giving non-core functions to an offshore firm specializing in such tasks.

Outsourcing trend is on the rise with many companies (although most of them are quiet about it), big and small alike, mainly due to rising cost of production, labor cost, taxes and other expenses. Outsourcing can heavily reduce the operating cost which includes administration, in-house training expenses, healthcare, insurance, taxes, hardware and software and the like. And the main reason on why operation costs are lowered is offshore money’s value being less than par foreign currency. Besides just saving costs, there are other factors that drive companies to outsource:

Absence of specialists or experts: In many companies, this has been the main driving force for companies to outsource. Complex process oriented projects demand expertise that may not be present in the company. Also sometimes the requirements may not be full time. Outsourcing is an alternative to hiring.

Irregular demand for personnel: For sudden increase of projects requires additional staff but is not feasible to hire staff. This scenario is perfect for outsourcing. Other similar scenario is large projects comprising of smaller parts that need specialists. And since it is small part of the project, it is not a good investment to hire new staffs just for the project. Again outsourcing would solve such problems.

Save time: Although outsourcing saves money, an experienced outsourcer can tell you that saving time has been more important. Money can be earned back but time will wait for no one. Time is literally money especially when management has to be involved in routine, secondary work in an organization (usually small or startup companies). By outsourcing the mundane, repetitive activity to, management are free to concentrate on key focus areas that demand intelligent, path breaking ideas and give their attention to top priority processes.

The key to successful outsourcing is to understand your needs and understand your vendor. It is important that your company lists out all the reasons to outsource and rank them in order of priority. Consult all management and even staff. I would like to put a personal statement regarding staff: Do not reduce your staff and outsource their works in order to save money. Outsource to expand your business or reduce further operational cost. Have some ethics..Anyways you should outsource to:

–          Achieve economies of production

–          Focusing and improving on the main core aspect of the business

Finding the right outsourcing vendor is a key. Obviously. Most people are too lazy to do their own deep research and end up partnering with a guy whose is running his operation in a farm shed using solar power and century old technology and later complains that outsourcing is not good!

Reliability is the prime qualification of any outsourcing provider. There should be a balance of quality service and price.

A little side note about price. In most developing countries, the value of the currency keeps changing. If the value of the currency is steady or declining (even better), than there is a certain that the price stated by vendor will not change. But if the value of country’s currency is increasing, then there is a possibility that the price stated to you will increase too. For example in the country where the price is rising, one would have to pay an  architect USD300. But as the economy picks up, the architect has to be paid USD500. Hence the vendor would have to increase its price to meet its country’s demand.

Outsourcing vendors should be able to maintain their price levels for a long period of time, which will give the advantage to their clients. This will be the single most important factor in the success of any company providing outsourcing services and effectively kill their competition.

Factors when deciding an outsourcing company:

A suitable infrastructure

Well qualified work force with experience tailored to the job.

Track record of keeping trade secrets

And finally an established track record of success stories.

Please do note that outsourcing should not be seen as a solution to all problems ailing a company. Management should understand the company’s need to outsource and weigh the risk and benefit before engaging into one. One should know that if the problem of the company is deeply rooted with the history of the company, it is not recommended to expect outsourcing vendors to solve them. Therefore analyze the root cause of the problems and then considering the option of outsourcing keeping in mind the long term strategic objectives of the company.


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