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Why and When should I outsource: A Detailed Analysis

Jason Thomas

October 02, 2008

Kudos to Outsourcing

Is outsourcing good for us? Should we outsource at all? Of course, yes! There's nothing inherently wrong with the concept itself! Just have a look:

I don't have space in my house to grow vegetables, and I can't buy a house with a large kitchen garden, so, I outsource them from my nearest vendor.

I can do my dishes and my laundry, but I find it too energy-sapping and time-consuming, so, I've hired someone who would save my time.

So, what do I do with so much of saved time? I write...which is in fact, my core competency!

And that's exactly the point I want to make. Same logical sense applies to your business. If you don't have enough capital or resources or if you want to save some recurrent costs and focus your time and money on your core competencies, you would outsource. More or less, every business out sources to sustain and to grow.

Outsourcing has today evolved into a preferred business practice for managers to use as a bridge to circumvent business problems, as a handy tool to focus on core issues and as a launch pad to enable businesses to register higher growth rates.

Advantages of Outsourcing

·  Outsourcing enables cost cutting and savings

·  Outsourcing enables you to meet deadlines sans stress

·  Outsourcing enables you to avail of world-class expertise and provide a better quality to your customers

·  Outsourcing enables you to offload the non-core and non-differentiating allied activities in your business and lets you to focus on more important functions….

·  Outsourcing enables you to gain a competitive edge over your rivals

·  Outsourcing helps you to innovate while you contract out the repetitive standardized processes

·  Outsourcing enables you to quickly respond to the changing market equations

·  Outsourcing enables you to function as a compact, coherent and streamlined business

·  Outsourcing enables quick expansion or upgrade in business, allowing you to take more orders

·  Outsourcing enables you to ward off risks

·  Outsourcing enables you to transform a process and remove any inefficiency

·  Outsourcing speeds up your pace towards your long-term business goals

In fact, outsourcing to a cheaper developing country like India, where you are spoilt with choices, with abundant talent in various fields and a vast English speaking population, will only add on to the general benefits of outsourcing. No Wonder, India alone accounts for 40% of the world’s outsourced IT projects.

When to Outsource?

How to figure out whether Outsourcing or more specifically, off shoring, is the answer to the problems you are facing in business? And even if you are not facing much of a problem yet, How to decide if you should opt for it for the sake of cost cutting and other benefits of off shoring? You should definitely consider outsourcing/off shoring seriously if one or more of the following scenarios sound like a description of situations in your own business venture:

·    When you need occasional or recurrent assistance with a particular function, say, legal matters or some programming need, hiring full-time employee doesn’t make good economic sense. Outsourcing a short-term job would not only be much cheaper but also easily sustainable.

·    When a small home business owner can't afford to hire employees but can easily outsource some help at very cheap rates from countries like India where there is a multitude of skilled professionals in various fields.

·    Even Independent Professionals can outsource the help needed in day-to-day office life like secretarial and clerical help or the expertise and specialized skills like IT, graphic designing, legal services, patent filing etc. This can be easily achieved by contracting out to other professionals (commonly known as virtual assistants or kpo consultants) through the internet. They offer their services and operate either independently through their own sites or through a dedicated and comprehensive portal for outsourcing like www.e-guru.in . They are experts in their field, would not ask for the usual employee benefits and don't need to be managed since you are their client.  For example, a doctor might need accounting services or a public speaker might need someone to develop software, and or an event manager might need a copywriter and so on.

·    When there is a skill shortage in a particular field, say programming and other IT skills, difficulty in finding right candidates coupled with high pay packages only underline the need for outsourcing. In fact, off shoring to a country like India, with abundant skilled professionals and lower currency rates would result in huge savings for you in terms of costs as well as quality

·    When your office has a history of acute employee stress, mounting pressures around deadlines and work-overload, you can ease off the burden by contracting out the time-consuming standardized processes which are the repetitive, easier and non-core parts of the business, thus enabling better productivity for yourself and your employees.

·    When a fast changing non-core process is a continuous drain on your resources. For instance, if you need to keep upgrading your IT processes according to the latest soft wares and technologies, but that's not your core competency, then it is better to consider outsourcing it to the IT experts in India who can better manage and run the process at fractional costs than to hire a full-time software development staff.

·    When you aren't satisfied with the quality of output of an in-house non-core business process, you can either re-train your personnel or hire more experienced candidates at higher salaries, both of which mean spending more.                               

     On the other hand, you can avail of world class quality as well as reduce your costs by off shoring the same to India. Though non-core processes bear no direct affect on the customers of your product or service directly but a shoddy quality doesn't bode well in the long-term. (At the same time, I would add a word of caution, you first need to examine and understand the reasons for an internal function's inefficiency and under-performance so that you know what to expect even if you eventually outsource it.) 

·    When one needs to expand to meet the growing demand and deliver increasing number of orders in time, but one doesn't have the infrastructure or resources to drastically upgrade yet, outsourcing is the perfect solution.

·    When one needs to start a new process in-house in a short period, one can outsource for immediate commencement of services and then slowly establish a dedicated in-house staff for the same.

·    When you need to transform an in-house process, it is advisable to outsource it on a short-term basis for the change to occur in a stable manner and once the operations are running smoothly and steadily, you can transfer it back home.

·    When a project or function is being inefficiently performed in-house for any reason, outsourcing it would insure you against the operational and financial risks.

Let me point out here that in recent times, though other avenues are fast picking up, but off shoring of IT services to the developing nations like India, is being particularly hailed as a generally successful deal for one and all. Areas in which outsourcing is gaining momentum are: Internet related programming, scripting languages, databases, graphic designing, animation, web hosting, accounting, recruitment, editing, copy writing, .NET technology, sql server, oracle, C/C++, embedded systems and similar projects most of which are being hosted for outsourcing at www.e-guru.in 

Conclusion

Making the right choice is less about choosing whether to outsource or not and more about what to outsource and to whom! So, I urge you to do your own homework, in-house research about what processes qualify for outsourcing, cost-benefit analyses, putting in place a stream-lined management policy regarding pre and post-outsourcing functions and goals, carefully selecting a destination which would offer you sufficient choices, signing up through a reliable channel, following up on it and the works.

In a nutshell, I would say, your action as well inaction - both will have a bearing on your business! And it is better to prepare yourself now and act before it is too late. Outsourcing is a boon for one and all. So, don’t chicken out, there is a whole lot of competition out there in business which is continuously trying to oust you. Just plan for it, go ahead with it and ensure yourself a place in the marketplace of future!

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