Why Do You Have To Outsource?

Because of outsourcing, business trends have improved dramatically all over the world. Offshore locations continuously receive more and more outsourcing opportunities. A lot of services can be found around the world that are being outsourced by large and medium scale companies. Pay roll, billing and collections, customer service and tech support are just some of the types of jobs being outsourced. More nad more companies get involved in outsourcing because most outsourcing jobs can be found in developing nations? A company can have a more stabilized monthly overhead cost due to the reduction of investment in hardware and software, manpower, and even customer support.

There are a lot of reasons that arise as to why you have to outsource a speccific area of your business. Reason behind this is because outsourcing can provide better economic advantages to a business. A lot of companies save a lot of money because they choose to outsource some of their services. India and the Philippines are now home to several call centers that specialize on customer care, technical support, billing and credit cards. Developing countries’ employees have more affordable wages compared to those employees in developed countries. Developing countries have such lower electricity and rent that you can be sure that your office will not sustain any expensive costs. Lower wages, cheaper benefits and rent make the overhead cost of outsourcing very appealing to man companies.

Outsourcing attains better quality of service because there is more focus on the specialized field, which is why it is favoured by many companies. Getting an employee to focus in one specialization makes them more effficient in dointg their tasks and allows them to give better customer experience to your customers. Batch training for new employess makes them specialist in specific fields of service in a shorter amount of time. With this it makes the outsources service more public to the customers by giving them more people that can service their needs.

Large organizations tend to have a complex internal bureaucracy that can hamper the speedy response to market demands. Outsourcing some services can put you in better control of the business. Focus on the core responsibilities and tasks is one of the ebst benefits that you can get from outsourcing some services that you have. Having the ability to concentrate on core functions can increase to flexibility of the company in order to meet changing business conditions and introduce possibilities of expansion.

A company needs to select carefully which service it wants to outsource to an offshore location as it can offer them limitless benefits. The countries who are at the forefront of providing offshore service for the US and Europe are the Philippines and India. If you want a more specialized approach into your business you better look into these two countries and which services they excel.

The Future: Outsourcing Trends

What is in store for business outsourcing? Will outsourcing continue to be one of the top business trends in the next 10 years?

As more companies rely on business outsourcing, there will still be a number of corporations who will remain apprehensive if this trend will develop and continue in the future.

According to Mohanbir Sawhney, Businessweek’s one of the 25 most influential people in e-business, the future of outsourcing could be best explained using an hourglass showing the blue-collar jobs at the bottom and the white-collar jobs on top getting hit the most. Shawhney explained that since there is a growing demand for skilled workers in developed countries, more people would rather work as a skilled worker and earn more than stick to their low paying jobs. Furthermore, Sawhney pointed out that the United States should be asking why a software guy with the same qualifications be paid more in the US when there is a similar guy in India willing to do the job at one-fourth the cost.

Datamonitor, a London-based market analysis firm made a report showing the lessons learned from past issues of outsourcing and what will make it go forward. According to the report, outsourcing is continuously expanding when it comes to vertical industry reach as well as geographic scope. Datamonitor added that best-shoring is considered the best strategy for an outsourcing business. This shows that more companies or their investors are now choosing to outsource some company functions to the best suited location. This way, investors would save on costs of sourcing the work domestically and this could further remove the implacability of using only one offshore location.

The globalisation of the workforce will continue to rise and there will be an increase to the quality of outsourcing skills.

In a special report conducted by BusinessWeek, it states that the management challenges will grow even more urgent as the increase in global salaries dissipate the easy cost gains from offshore outsourcing. Furthermore, companies who will be successful in the future are the ones who will be able to transform themselves and their industry and at the same time being able to take advantage of global talent while still being able to provide jobs for everyone.

The Best Practices in Outsourcing

More and more companies nowadays, have resorted to outsourcing in order for them to cut their overhead costs. Moreover, a lot of companies in the United States and in Europe had paved the way for the increase in the employment rate of some of the developing countries such as India, China, and the Philippines.

Outsourcing, however, is not just delegating tasks and/or getting the service of a certain provider and providing employment to low wage countries. There are some rules and practices that the companies must learn and follow in order for them to be succesful in this field and gain an even more increase in their profits.

First of all, the companies and the providers must develop good working relationship with each other. The usefulness of the relationship between the key management personnel of both teams depends on good understanding and strong working ties between them.

Presenting a quantifiable objective is also an important factor in outsourcing. The client or the company requiring the service must clarify with the provider their level of expectation when it comes to quality of service. That way, strifes or misunderstanding will be avoided.

Before the signing of the agreement of the client and the provider, they should agree first on the incentives if the provider would be able to meet the client’s expectations, and the penalty schemes if the objectives would be consistently missed. The provider should be driven to meet the established customer expectations or even exceed it by adopting the performance based pricing criteria.

The client must review periodically the performance of its provider. A formal review meeting at least twice a month would be of great importance. This way, the two parties could discuss the performance of both teams and further determine the future goals and objectives of the company accordingly. Moreover, the meeting could also be a good avenue to discuss product reviews and all other deliverables. Both parties must understand that there might be a need to revise performance objectives to adapt to the the changing market conditions and the opportunity costs of both firms.

Most importantly, communication between the two parties must always be placed on top priority. The client and the provider must ensure that they communicate well with each other to be able to bridge whatever cultural differences they may have. Since the two parties belong to different countries and cultures, it is expected that there are some things or issues that they might not agree on most of the time. It could, however, be enhanced by organizing social events, educating each other about company background, and active participation in each others’ quality programs. As always, communication is always the key to better understanding and establishing good and healthy relationship. It might also be a good idea to send a top and loyal employee to the business process outsourcing site for a couple of months to make him/her understand the implementation phase.

Outsourcing Trends? What You Need To Know

Outsourcing has been around for quite some time now but it just recently grew recognizition when large compnaies moved their service centers to developing antions because of the benefits that it brings. Delayed outsourcing deals will now be reopened because of the steady recovery that economies around the world are going through right now. IAOP or the International Association of Outsourcing Profesionals came up with a list of trends that are going to be seen for outsourcing within this year.

Five years ago out sourcing was the best idea. Call centers grew like mushrooms all over the Asia-Pacific region. The question “why do we need to outsource?” has caused a rather slowing down of the hole development of the outsourcing industry?”. Outsourcing is back this year and is a whole a lot bigger than before!

Outsourcing has given companies and corporations something to think about rather than just see outsourcing as a means of saving time and money because they now see that it also can improve dramatically how business operations are done and it enables companies to focus on the more important aspects of running their businesses. India and the Philippines were at the forefront of the Asia-Pacific region as the center of the outsourcing business before. Asiap-pacific regions will start seeing more and more competition arising from different regions.

South American countries such as Brazil is one of the major contenders in the offshore business industry. Central America and South America are now being more conducive to the outsourcing needs developed countries. These emerging locations will surely rock the outsourcing world especially India’s share of offshore work. The competition between established locations such as India against emerging locations such as Central and South America is leading to drive differentiation. training and certification will now be provided and used by countries to ensure that they stay ahead of the competition.

Companies that will be at the forefront of the outsourcing industry according to IAOP will be the small and medium scale businesses. Many large scale companies have already outsourced some of their services a few years ago but they are somehow still considering on outsourcing more and more of their products and services. These larger companies will have to wait it out a bit because the larger enterprises are still hoping to resolve more of the technical and business challenges before jumping in and outsourcing a new. The Information and Technology outsourcing market is expected to bounce back though it isn’t expected to be too resurgent. IT outsourcing is not even close to the number of growth that it achieved before the economic crisis in 2008. The year 2010 is expected to be a bumpy road for suppliers and providers of outsourcing.

Outsourcing Defined: What It Means To Business

Services and industries are adapting to the development brought about by outsourcing. Outsourcing simply means that a company chooses to let a third party company to run a certain process in their business that can also be done by their in-house employees.In other words, outsourcing is the reassignment of a specific business process or service to a third party company . A lot of medium to large scale companies are engaging in outsourcing these days and the numbers continue to rise as years go by. An example of jobs being outsourced are call centers who run services such as technical support, credit cards, medical transcription, and even bill payments. A variety of companies offer different services but some offer similar services but are geared for different types of clients. Developing countries usually are the nesting ground for outsourced jobs and services.

Only recently has outsourcing been used for a lot of specialized services but outsourcing itself has been around for a long while. Payroll, billing, and data entry are outsourced mainly because companies want to have them specialized for more efficiency. The advantage of specializing a certain process is that it makes it more efficient and more lucrative. Lower operational costs and specialized services are some of the main reasons why foreign companies resort to outsourcing.

There could be a lot of reasons why companies choose to outsource most of their positions. But the primary reasons why companies outsource jobs is because it saves a lot of time and money, which is a very huge advantage for a lot of companies. Many of the companies prefer to outsource services to developing nations where salaries and benefits are not as high as in the original location. Philippine outsourced wages are not even close the minimum wages that are paid to United States workers. Benefits such as health care, bonuses, wages costs much lower if you outsource at developing countries than availing them at the business’ original location.

Information technology outsourcing and business process outsourcing are perhaps the two most popular types out of the several forms of outsourcing. Outsourced information technology services often means the transfer of computer and internet related labor. This form of outsourcing creates jobs for programmers, web site developers, and other technology related professions. On the other hand, business process outsourcing involves call center outsourcing, human resources outsourcing, investment and accounting outsourcing, and claims processing outsourcing. IBM and Accenture is involved in business process outsourcing and they are just a few of the big named companies who are into this type of business.

Just like everything else, outsourcing also has its disadvantages. Detachment between the company and the client relationship is one of the main disadvantages of outsourcing. Services like customer care is one of the highest priority in outsourced services nowadays. One of the disadvantages of outsourcing is the loss of opportunities in the mother land because most of the jobs are being outsourced to developing nations.

Outsourcing Advantages

The main trend in business nowadays is outsourcing their production process and other services to offshore locations. The term ‘outsourcing’ refers to the process of subcontracting goods and services to an outside supplier who is usually in a different country. A lot of companies choose to outsources because of its many advantages over the traditional process of production. This article will provide you some of the advantages of outsourcing for your business.

Companies usually choose to outsource because it lowers the production cost and the expenses of IT and customer services. Popular offshoring countries like China and Vietnam do not have labor laws allowing wages to be relatively cheaper. This guarantees that the company will get the most out of the capital invested in the business.

A consequence of the advantage mentioned, outsourcing will reduce the overhead cost of maintaining the business. Outsourcing will allow you to reduce the number of your employees which will lead to savings in utilities, taxes, insurance among others. This will mean savings for your company that can be invested in other parts of the business.

Another advantage of outsourcing is that it enables to have better control of your business. Since outsourcing may reduce the number of employees you have, you can now manage them with more ease. With this, you can make your employees more accountable to what they do within the company.

Outsourcing can also allow you to focus on the marketing process of the business. By taking production and other process away, you have more time to plan of how to sell your goods more efficiently. This will increase the efficiency of the marketing capabilities of your company.

Another advantage of outsourcing is being able to transfer a production process to an offshore company that specializes in that specific operation. This means that outsourcing can potentially increase the quality of your goods by finding a business partner that has operational expertise. And since they have the better knowledge and know-how, you are better off with them producing goods for you.

Outsourcing would mean an exposure to a procedure that your company does not know. In short, it enhances your business’ capability for innovation. It provides your company with new insights that could lead to the improvement of goods.

All the advantages discussed show how outsourcing can be good for your business. The main goal of outsourcing is to ensure the global competitiveness of your business. Although it seems paradoxical, making your company smaller will allow it to become stronger in surviving the tough international competition ahead.

Obstacles to Outsourcing

The notion of importing manpower and services from other countries has been around since the commencement of international trade. Nevertheless, the substance of outsourcing as known today enables the global workforce to be integrated in various ways. However, there are some outsourcing barriers that we have to confront before we can regard it as suitable to our business.

The advantages of outsourcing are countered by several challenges. One significant element is the economic and political state of the country. Less developed countries have a high possibility to have unstable governments. Furthermore, the economic policies of these nations can switch from one political cycle to the next. Therefore, there is a degree of unpredictability that increases the risk for companies who are interested in outsourcing.

A further significant hindrance 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.

Another outsourcing challenge is a country’s existing infrastructure. This is composed of the telecommunications infrastructure, the legal system, and the banking system infrastructure which ensures financial stability. 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 the major challenges are deliberated, enterprises will need it handle other outsourcing obstacles for instance, training, ability to integrate operations, knowledge transfer, and cultural gaps. Collaborating with offshore partners requires companies to adapt to their local operation in order to be compatible with them.

Beyond all of these, there are dynamic challenges that we need to consider. This includes management challenges, security risks, time-zone, human resource management, and more.

Not everyone is capable to outsource. There are specific situations when outsourcing challenges outweigh the advantages. In conclusion, you have to think whether outsourcing is beneficial for your business or not.

Learning From The History Of Outsourcing

When did outsourcing begin?

many business owners and companies have practiced this set-up for quite some time now even if the concept of outsourcing was not yet popular, and the fact is, outsourcing has been around for thousands of years now. People during the ancient times understood the importance of outsourcing as they themselves have realized it is impossible to meet their needs on their own. Moreover, some people with specialized professions also started to trade their services with other nations in exchange for goods or an equal service, too. That was when outsourcing was born.

There was a high demand outsourcing the production of goods back in 1750 to 1900s during the European Industrial Revolution. Since then many companies have decided that they should outsource their business specific functions such as legal needs, accounting, and insurance to third party companies specializing in the said fields. However it was done within the limits of the country since offshore outsourcing is not yet open during those times.

It was in the middle of the 20th century when some companies worldwide welcomed the idea of offshore outsourcing. Developed countries showed a great need for manufacturing at a lower cost thins such as electronic goods, toys, apparel and other stuff to developing countries. Companies started to be more open to the concept of outsourcing since it helped developing countries increase employment and also their levels of income. Education levels and the skills of workers in developing countries has dramatically improved. Developing countries’ governments have started creating competitive infrastructures that is necessary for the company to maximize their profits.

The years that followed saw the fast development in the field of offshore business outsourcing. Two facets played a major role in the development of outsourcing, that is IT development and computer technology. Companies started outsourcing their business specific functions to offshore and third party service providers such as human resource, accounting, and data processing. The specific core functionalities still remained under the management of the company.

Offshore outsourcing is now one of the best business concepts. From the early needs of the manufacturing business, outsourcing has evolved and moved into the world of information technology, data transcription, and call centre operations. Basically, outsourcing provided not only employment for people in the developing countries, it also help the companies themselves to even hit a greater profit since they could very well save on the cost of employment wages and benefits. Many companies are now adhering to outsourcing their core business activities just to ensure that they would gain more profits from doing so. Needless to say, outsourcing has really become an essential part of a large organization.

Leading Countries In Outsourcing Industry?

As an organization strikes a deal with another company, either on-shore or offshore, and assign to them some of their tasks and functions, then that is called outsourcing. Developing countries like China, India, and the Philippines’ economies continue to benefit well from the outsourcing industry. Business process outsourcing, knowledge process outsourcing, and information technology outsourcing are the three major types of outsourcing There are three kinds of outsourcing; the information technology outsourcing, business process outsourcing, and the knowledge process outsourcing.

The Business Process Outsourcing which is often referred to as BPO is a type of outsourcing industry which involves outsourcing a particular task or functions such as customer relations management, book keeping and business consultancy. Knowledge process outsourcing or KPO involves in-depth research and analytical skills that are outsourced to other companies. Programming, website development, and other computer related functionalities are known as Information Technology outsourcing. Business process outsourcing is the most popular and in demand type of outsourcing among the three.

Some of the reasons companies choose to outsource their specific job functions are: cutting down costs – it enables companies to look for countries that have much lower wages and outsource some part of their functions there. Another main reason why companies tend to outsource is because the company itself lacks the resources to get the job done. Since some companies do not have the resources to perform a specific business function they outsource them to other companies who are guaranteed to be able to accomplish those tasks. Increase in flexibility is one additional benefit of outsourcing since they are able to meet the erratic demands of the industry and the clients.

Outsourcing enables a company to save a lot of time and energy in performing specific functions. Outsourcing also helps companies have a tighter grasp and control of its budget because costs become more predictable when they outsource. Companies can focus on core functionalities and since they know the importance of outsourcing their other business activities to companies, thus making sure that they are also achieving high quality standards in accomplishing those tasks.

The major locations for outsourcing are China, India, Philippines, and Malaysia. These countries boost the growth of outsourcing for them because of the lower wages being paid yet the high quality results of the tasks being given to them by multinational companies and corporations.

Choosing Among Outsourcing Services

Outsourcing has become one of the most dominant business practices all over the globe. Since almost all industries in the world are in competitive global area, there is more demand for high-quality and more diverse products. This is where outsourcing comes in: there are certain segments the supply chain that are passed on to outsource partners so that the whole process ensure more quality and efficiency. This means that ultimately, the consumers are the bigger winners.

At the same time, this trend of outsourcing services has given rise to new needs for industries, such as better communication. Firms have needed more efficient methods of communicating with other firms since, at times, they need to correspond with the service companies in order to clarify specifications or ensure prompt delivery. There is a need for dependable telecommunication because outsourcing services rarely happens within borders. Many businesses decide to outsource from low incomes countries where the costs for their services are considerably lower. For an example, clothing outfit H&M outsource production to Bangladesh and China. Thailand is known for producing high-quality T-Shirts.

It is also evolved into a competitive market for outsourcing providers. Luen Thai has been continually expanding its operations to absorb the supply chain process of Ralph Lauren which means they will make more money while letting Ralph Lauren save money on production and shipping. Moreover, shoe manufacturers in the Philippines, for example, have been losing business to Chinese producers. One report mentioned that 60% of shoes produced in the Philippines are outsourced from China.

Therefore, if there is any indication of the world becoming a more globalized society, then the trend of outsourcing services is it. For one, this trend makes things more difficult for companies since various factors like the legal system, trade barriers, and cutthroat competition makes growth almost impossible. Nevertheless, this also permits brilliant prospects for starting businesses. The true winners in this trend are the consumers, who will ultimately benefit from high quality, and better-priced goods.