The What, Why, How of Outsourcing and Offshoring

What Why How of Outsourcing in Flat WorldOkay everyone, geography is history now. The Internet has changed the rules of the game and distances don’t matter any more! You could be sitting in Indiana and your help center staff in India. It would still work – at almost half the cost.

Nearly one-fifth of all organizations are currently using offshore service providers (outside of the U.S. and Canada). Latest statistics show that the use of offshoring is also increases substantially as an organization grows. Here is an interesting article

Growth of IT Outsourcing that talks volumes about the growth of IT outsourcing.

When did Outsourcing begin?

Outsourcing can technically be said to have started in the early 1980s with European airlines setting up back-office operations in the Indian Capital of New Delhi. In the second half of the 1980s, American Express consolidated its JAPAC (Japan and Asia Pacific) back office operations into New Delhi. In the 1990s Jack Welch set up GECIS (GE Capital International Services) with call center operations in India!

Today, Information technology outsourcing covers almost 28 per cent of the total outsourcing market according to an interesting article at bizbrim.com. Most jobs are outsourcing by Multinational companies and the favorite destination as of now is India followed by Philippines and China.

What is Outsourcing – should I be bothered?

Outsourcing refers to the process of subcontracting work like software development, SEO, etc to a freelancer or a full-time worker contracted by an outsourcing vendor in another country – usually India when it comes to American and European businesses.

Let’s say you need to develop an SEO strategy for several websites. Instead of hiring people locally and wasting energy on setting up a small office you can simply go online and find freelancers who would do the work for you according to your deadline. If you don’t think you are ready to work with individuals, you can contact an outsourcing vendor. That ways you work with a company. An outsourcing vendor already has staff that would work on your project while you have the satisfaction of having entrusted your project to a competent company with a past record and greater credibility.

The basic office set-up is already available in India so you don’t have to waste money on that either. The biggest benefit is of course international-class service and products at much cheaper costs.

What should you Outsource?

Basically you can outsource not just the manufacture of products but services also. Here is a simple chart to help you understand the scope of outsourcing.

  • Call center services – This can include both inbound and outbound call center services, technical help desk for your company products, disaster recovery services, chat or email support services, telemarketing services in English, Spanish or any other language, virtual call center, virtual assistants etc.
  • Data entry services – This can include, apart from basic data entry, data conversion and processing, catalog conversion, translation, etc.
  • Engineering services – Like engineering, mechanical, civil engineering, architectural, structural engineering services, etc.
  • Financial services can include book-keeping, accounting, analysis, tax preparations, payroll services, etc.
  • Healthcare services – can include medical billing and coding, medical bills processing, Healthcare accounts receivable services, Teleradiology, EMR software, etc.
  • Photo Editing services, Image clipping services, Image manipulation services, Photo restoration services, Conversion of raw images, Image enhancement services, Image, blending services, Image stitching services, Web analytics services, Software configuration services, Data auditing services, Dashboard creation services, Reporting and analysis services, Website optimization services, etc.
  • Software outsourcing – This is possibly a major part of the outsourcing industry with software development, software testing, website designing, Infrastructure management services, Web enabling legacy applications, Software as a service (SAAS), Open source software development, Content management systems, Customer relationship management, Product development services, etc. all being outsourced.
  • Transcription services – These can include transcriptions of all kinds like legal, video, audio, market research, academic, media, business, toll-free dictation, foreign language transcription services, audio editing, etc.

The list is pretty endless. If you can imagine it, you can possibly outsource it. Rather if you can get it done in America you can get it done in India – at way low a cost.

Do Small Businesses also benefit by Outsourcing?

Possibly small businesses benefit more from outsourcing than bigger ones. Okay, okay we know the cost-saving bit but are there really any other benefits?

Actually, the benefits of outsourcing for small businesses are several:

  • Controlling capital costs and production costs definitely are major benefits of outsourcing. You can then pass on the savings to the customers or use the capital savings for something else like advertising.
  • Your outsourcing vendor or partner will focus on efficiency of the work while you can spend energies on something else like marketing and advertising.
  • If you have a short-term project why waste energy, time and money to hire staff? Let outsourcing take care of it. Cost-effective and way simpler.
  • A good outsourcing partner or vendor would be able to help you start new projects quickly – often within a week! Handling a similar project in-house might require months of planning and development.
  • When you outsource, as a small entrepreneur you have more time at hand to improve your overall business strategy.
  • Another big benefit of outsourcing is that as a small business you can actually compete with the big business houses without having the investment. It’s a level playing field with outsourcing.
  • Outsourcing companies can reduce your risk of investment as they already have a business structure and experience to handle the work.

Where should you Outsource?

Of course, with the Internet, the world’s your oyster. But some of the best countries to outsource are India, China and Japan. India leads the way considering they have some an educated population of young people that is as competent at English as any Westerner on the streets of New York. Give it a shot and you could be amazed.

Whom to Outsource to?

Trust is going to be a big factor when you begin with outsourcing. The best way to start is usually to ask your friends, look up internet websites like guru.com, elance.com, freelancer.com etc. You might also like to find out where other local businesses are outsourcing their work and they contact a vendor through an Internet portal or directly.

The risk of Outsourcing

The only risk with outsourcing is when you pick a vendor that is not able to provide competent services. Well! If you get the wrong chef to work the broth then surely it’s going to be a messy dinner. Therefore, if you pick an outsourcing vendor or partner carefully, there won’t be much of a problem on that count. The only other risk with outsourcing is meeting of deadlines. For that again, it is the efficiency of the outsourcing vendor that counts.

The future

Remember when barely a decade back we used to wonder how magical would it be to be able to phone someone long distance and also see their real-time video? Well! The future’s already here.

The globalization of the workforce is the next big trend across cultures, populations and countries. What remains is the increasing emphasis on the improvement of the quality of outsourcing skill-set.

Business Week predicts that successful companies of the present and the future are those that can make the best of the global pool of talent now available so easily. Surely, outsourcing is the way to go… that is if you don’t want to sit around and get run over.

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