Outsourcing - New Back Bone

The Oxford English Dictionary defines the verb "outsource" as "to obtain… by contract from a source outside the organization or area; to contract (work) out".

"Outsourcing is the use of external agents to perform activities that were previously performed within the organization" [King].

Classic examples include electrical component manufacturing, and perhaps the earliest form of information processing outsourcing – payroll processing

There are five WH- strategic questions to be answered before stepping ahead for Outsourcing.

1. What is outsourcing?
2. Why outsource?
3. Who should outsource?
4. Where should you outsource?
5. When should you outsource?

Information Communication & Technology made great changes in a way of business. Use of electronics, communication and software reduced cost & time of business transactions. The availability of real-time information via the Internet, satellite and transoceanic communications allows businesses to be sustained instantaneously around the globe. New information technologies let fewer people do more work and also help quickly bring new skills to learners everywhere.

Earlier outsourcing was not crossing the boundary of countries. But due to technology it has crossed even continents. Countries like India, Philippines, Russia, China, Canada, Mexico and Ireland are having pool of knowledge, well English speaking & learned people and found at very low cost. Such countries are being best in getting outsourcing.

Outsourcing specially business process outsourcing & IT outsourcing are in demand. IT outsourcing we mean outsourcing the development of relatively large software development projects. Business process outsourcing, on the other hand, can include outsourcing of a call center or help desk function, or even the computer security function.

Top reasons to outsource your business processes...

1. Cost Reduction
2. Focus
3. Expertise
4. Resources

Cost Reduction

Business process outsourcing (BPO) to countries with less expensive labor is emerging as a means to reduce costs and enhance shareholder value in the shipping sector. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. Hiring and training staff for short-term or peripheral projects can be very expensive, and temporary employees don’t always live up to your expectations. Anyway cost of staff is lesser in other countries compare to US. One Singaporean worker costs as much as three in Malaysia, eight in Thailand, thirteen in China, eighteen in India. Thus if worked can be outsourced, you don’t need to pay for small work which can be done at small amount.

Focusing your business

Limitation of time, resources and attention is a reason to outsource. Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.

Free up your "rainmakers" and account managers to focus on generating new sales and avoid getting your staff bogged down with work better fulfilled by experts outside of your organization. Even Outsourcing can also make your firm more attractive to investors, since you’re able to pump more capital directly into revenue-producing activities. Big companies are off-shoring almost exclusively in pursuit of efficiency and shareholder value enhancement.

Outsourcing lets you focus your human resources where you need them most. Companies that do everything themselves have much higher research, development, marketing and distribution expenses, all of which must be passed on to customers.

Expertise

With specialization comes trade. Outsourcing service providers have a higher level of experience than what you might be able to afford in a full-time employee. Contractors have worked many years as full-time employees and reached the point where they realized they could go it on there own--be their own boss, focus on the kinds of projects they like to take, and have more control over their working environment. You can take advantage of that experience without budgeting for a new full-time employee.

Resource

An outside provider’s cost structure and economy of scale can give your firm an important competitive advantage.

Generally contractors are expert in their field with own infrastructure. Outsourcing reduces burden to own every technology & people. Software developing company enables your business improving your information & communication ability. But to improve your communication & IT capabilities, you don't need to own costly software & people just for development.

It’s no longer about what you own or build. Success is tied to resources and talent you can access. Using global expertise allows you to gain the advantage of skilled labor regardless of location, and to significantly increase the quality of your deliverables. Now it is possible for small players to do business.

Especially in case of ICT, outsourcing is done to relieve resource constraints, reduce IT staff and augment IT staff.

British Airways, which carries out multiple back office functions from India, has scaled up to over 1,500 people and is said to be saving close to US$30m per annum in staff costs over and above the improved productivity levels.

Moving to more outsourcing…

"Outsourcing isn't just for IT anymore; other business processes can be outsourced to great advantage" says Peter Bendor-Samuel. By 2015, analysts predict that more than 3 million white-collar jobs in the U.S. will be farmed out to other countries, up from about 300,000 today.

However outsourcing has made threat of losing jobs to another country in US & Europe market. But if you are growing your business fast by outsourcing to other, definitely you will be able to create more responsible jobs for your country again. Growth never shorts anything.

Outsourcing does not need to fit your requirement always. Culture, reasons & trust are key reasons to find right contractor. Supervisions & attention to contractor are always necessary to ripe from outsourcing.