Art of Outsourcing

 

  

1.Focus On Core Activities

 In rapid growth periods, the back-office operations of a company will expand also. This expansion may start to consume resources (human and financial) at the expense of the core activities that have made your company successful. Outsourcing those activities will allow refocusing on those business activities that are important without sacrificing quality or service in the back-office.

Example: A company lands a large contract that will significantly increase the volume of purchasing in a very short period of time; Outsource purchasing.

 

2. Cost and Efficiency Savings

Back-office functions that are complicated in nature, but the size of your company is preventing you from performing it at a consistent and reasonable cost, is another advantage of outsourcing.

 

3. Reduced Overhead

 

Overhead costs of performing a particular back-office function are extremely high. Consider outsourcing those functions which can be moved easily.

 

Example: Growth has resulted in an increased need for office space. The current location is very expensive and there is no room to expand. Outsource some simple operations in order to reduce the need for office space. For example, outbound telemarketing or data entry.

Operational Control

 

4. Operational Control

 Operations whose costs are running out of control must be considered for outsourcing. Departments that may have evolved over time into uncontrolled and poorly managed areas are prime motivators for outsourcing. In addition, an outsourcing company can bring better management skills to your company than what would otherwise be available.

 

Example: An information technology department that has too many projects, not enough people and a budget that far exceeds their contribution to the organization. A contracted outsourcing agreement will force management to prioritize their requests and bring control back to that area.

  

5. Staffing Flexibility

 

Outsourcing will allow operations that have seasonal or cyclical demands to bring in additional resources when you need them and release them when you're done.

 

Example: An accounting department that is short-handed during tax season and auditing periods. Outsourcing these functions can provide the additional resources for a fixed period of time at a consistent cost.

 

Example: A small doctor's office that wants to accept a variety of insurance plans. One part-time person could not keep up with all the different providers and rules. Outsource to a firm specializing in medical billing.

 

Risk Management

 

6. Continuity & Risk Management

 

Periods of high employee turnover will add uncertainty and inconsistency to the operations. Outsourcing will provided a level of continuity to the company while reducing the risk that a substandard level of operation would bring to the company.

 

Example: The human resource manager is on an extended medical leave and the two administrative assistants leave for new jobs in a very short period of time. Outsourcing the human resource function would reduce the risk and allow the company to keep operating.

  

7. Develop Internal Staff

 

A large project needs to be undertaken that requires skills that your staff does not possess. On-site outsourcing of the project will bring people with the skills you need into your company. Your people can work alongside of them to acquire the new skill set.

 

Example: A company needs to embark on a replacement/upgrade project on a variety of custom built equipment. Your engineers do not have the skills required to design new and upgraded equipment. Outsourcing this project and requiring the outsourced engineers to work on-site will allow your engineers to acquire a new skill set.

Outsourcing Benefits A

Benefits of Outsourcing

Outsourcing, in its early days, seemed possible only by larger companies which farmed out many low-end business processes. Since then, outsourcing has become more of a norm than an option. Apart from the cost savings, outsourcing is seen as a strategic move that can allow businesses to gain a competitive advantage.

 

It certainly has opened up opportunities for organizations to utilize skill sets and expertise that they normally would not be able to access without large investments. It has also become a savior to startups and small businesses which have to work with modest capital.

 

At the lower end of the spectrum, outsourcing back-end jobs such as data entry/ processing, customer support, payroll processing etc. have helped organizations save a staggering amount of money. Now, there are service providers across the globe who specialize in simple back-office services to high-end services like manufacturing design and legal outsourcing, to name a few.

 

Before deciding to outsource, it is important to define what specific goals are to be met. One should also be aware of the risks that outsourcing carries. All said and done, outsourcing is definitely part of many companies' decision making process. Some of the benefits of outsourcing are: 

  • Lower costs 

Lower costs are perhaps the prime benefit of offshore outsourcing. You can get work done at a fraction of the cost that you would have to spend locally, while getting better quality as well. Because of the differences in pay and standard of living that exist between Asian and Western countries, labor costs are much lower in Asia. On an average, you can expect about 60% cost savings if you outsource to countries like India, China, Malaysia. 

  • Skilled Expertise 

Finding skilled resources is one of the biggest challenges faced by companies today, not to mention the investment required to train employees and the attendant infrastructure required, which can rapidly drain funds. Outsourcing frees companies from these hassles by providing access to skilled resources at lower costs, with the additional benefit of not having the burden of managing them directly. 

  • Time zone difference 

Because of the time zone difference between Asian countries and the West, you can get your work done while your business closes down in the evening. This is especially beneficial for companies in the service industry that need to provide round-the-clock customer support.  

Outsourcing Benefits B

 

  • Focus on core competencies 

As a company grows, administrative functions also grow. Managing back-office operations and administrative functions takes the time and energy out of any organization. Outsourcing frees companies from having to manage non-core functions, and puts the focus back on their core competencies. Entrepreneurs and enterprises alike have benefited from outsourcing repetitive and mundane tasks, and have had more time and opportunity to grow their business. 

  • Increased productivity and Efficiency 

Outsourcing not only brings cost advantages but can also improve the efficiency of business operations. If your business goals are properly aligned with the deliverables in outsourcing, productivity and efficiency are bound to increase. Outsourcing providers with the right expertise and experience can actually help streamline business processes and contribute to the bottom-line.  

  • Distribution of risk 

When certain functions are outsourced, companies also distribute or do away with the risks associated with running that particular function. For instance, if payroll management is eating up your operational time and money, outsourcing it to a payroll services provider gives you the freedom to focus your concentration on other core activities of the business. 

  • Improving customer service 

Customer service is paramount to any organization. Through outsourcing you can service your customers faster, provide better quality and decrease turnaround time. 

  • Better people management 

Since outsourcing takes care of the skills necessary to run a particular business process, your business is much more flexible in investing in key resources. Instead of worrying about hiring people for your back office operations, you can focus on getting resources to grow your core competencies.

 

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