By Mike Selvon

With the economic trends that US companies are forced to deal with, more and more business consultants are declaring that there is simply no better time than the present for struggling companies to weigh the advantages of either local or offshore outsourcing. With the economy heading into a downturn, companies across the board are looking for ways to minimize costs while increasing competitive advantages. Choosing to outsource certain operational business processes can provide these benefits.

However, it should be noted that saving money is not the only reason to outsource projects and services. In fact, according to consultants that work closely with a variety of companies to help them with their outsourcing needs, cost efficiency is not always the principal reason for this practice these days, even though it is always a factor to one degree or another.

Frequently, in today's business climate, the primary motivation to turn to outsourcing is the ability it offers an organization to concentrate on their core strengths and on strategic initiatives. Many times a company will outsource to gain a competitive edge; by strictly focusing on what it does best and outsourcing ancillary business activities.

A second reason for taking advantage of outsourced services is to gain operational efficiency in many areas. A company can leverage equipment, staff, training, inventories, experience and expertise of other organizations when they outsource projects to established outsourcing services. This in turn allows for an increased "speed-to-market" with new ideas, products, and services and also allows for leveraging of scarce or expensive resources.

This truly can create a win-win collaborative partnership with the other companies that will provide the outsourced work and materials. Arrangements such as these allow each company involved in a project to focus on its strengths, while outsourcing its weaknesses. This strategy has proven to be a highly effective way to use both human resources and material resources in an organization.

These are significant and compelling reasons for any company to consider outsourcing, especially those undergoing phases of growth and expansion. But making the decision to use outsourced services to reach tactical objectives is often the easy part; the rest of the process can be much more complex and even delicate to carry out.

The next step is to identify the right outsourcing services provider that will be able to integrate seamlessly into the current business operational model. Service level agreements that will be made between the company and the provider of the outsourced work must delineate expectations of both parties and set parameters for measuring the success of a project. This important stage helps determine value of managed services outsourcing and can help avert potential disagreements.

Some vendors of outsource services might raise objections to putting such metrics and reporting agreements into practice. However, the lack of this kind of agreement should be cause for looking for a different vendor. In such agreements, there should also be an allowance for making changes to measuring methods, as needed during the life cycle of the project being outsourced.

By Yuan Yudistira

By the time you decide to outsource, the first step you do is choosing the right outsourcing provider. There is hundreds of outsourcing provider around the globe. But the number decrease if you search for a very specific keyword that match your industry.

Choosing the right outsourcing service provider is not easy. If you fail to get the best one, it may hurt your business - no kidding!

So here I compile a check list that you can use as a reference to see if the outsourcing provider is the right one for your business.

But before you go any further, I want to remind you that The Most Popular Outsourcing Provider out there may not be the best or the right one for you. You have to consider many aspects.

Ok, here we go with the check list:

1.Communication. Can you easily communicate with the service provider?

Communication is very important aspect. The many communication media they have the better. Can you contact them by phone, email, chatting and web based application? Do they speak your language? Do you understand their message? And do they understand yours? How responsive they are to your inquiry?

2.Quality. Do they offer a quality assurance?

You want to get the best for your money, right? So you have to make sure that the outsourcing service provider the quality you need. If they do have the expertise, then it is easy for them to offer a Quality assurance. And then you can be sure that you get the best for your money

3.Reference. Check for their reference!

References can be bad reference or good reference. You have to check and find out if their customer is happy with their service or not. And if you found an unhappy customer, find out why? You have to be aware that unhappy customer does not mean they are bad. It may be because of other things that both parties have a responsibility for.

4.Cost or price.

You are right! It is all about money. You have to make sure that the price of their service is making sense. You would not hire outsourcing company if they are offering 100$ for making software like Microsoft word, would you? Beware of company who offer a very low price. It may have a relation to quality. But please, do not misunderstand me. Not all high price service delivers high quality. Compare the price; make a matrix table if you have to! Payment terms, is also one thing you should not forget to consider.

By Taitelul Verde

Small businesses can benefit from business outsourcing. Rather than focusing exclusively on the costs of outsourcing certain activities of your business, you should also consider the benefits such a change would bring.

Cost Reduction

Business outsourcing can help lower your business's expenses. Let's say you have ai clothing business. The equipment you're using is not the best in the line, and it contributes to increasing your production costs. But what if you simply outsource your equipment needs instead? Would you be able to lower your production costs?

Labor costs can be reduced as well. Rather than hiring temporary or project-based employees, why not simply outsource your human resource needs to BPO vendors who know exactly what they're doing? Working with an experienced frm will ensure that you don't have to waste time going through dozens of applicants just to find a perfect fit.

No Waste of Time

Business outsourcing let you take on projects right away and start on them immediately. Rather than spending time amassing your resources, you can simply approach a BPO vendor and they'll provide you with all the resources you need for a fixed cost. The BPO vendor will take care of everything, from screening applicants to training them for their new job. All you need to do is simply give the BPO vendor an idea of what your needs are.

Improved Efficiency

Consider how your business operates. Is marketing research and development or product distribution slowing you down? If none of them make up your company's core competencies then nothing is stopping you from outsourcing them. By contracting such functions to a trusted third party, your company's efficiency is improved two-fold: you have more time to focus on more important activities while contracted activities are performed at an even more efficient rate since they have greater resources and expertise than you do in those fields.

Act Big

Small businesses are David and the big scary corporations are Goliath. But David managed to beat Goliath, didn't he? And all he had was a sling. In the world of business, BPO vendors are the ones that could provide you with the exact kind of sling you need to defeat your competitors. With the help of business outsourcing, you'll be able to level the playing field and maybe even face down the competition in time.

Lower Risk

Almost everything in business comes with a certain degree of risk. Of course, the lower the risk, the better your position is. Business outsourcing can reduce the risk you're taking in various ways. When you're entering a new market, you can let a local BPO firm handle marketing research and development for you and you'll be privy to insider's knowledge.

Building Your Reputation

You've graduated from a culinary school with flying honors and you bake the best brownies in town. You want to go into business but you don't know how to package and distribute your product effectively. Rather than force your customers to tolerate your bungling efforts, why not outsource your needs to a firm with the kind of expertise that will impress your customers?

By outsourcing your needs to experts, you're able to quickly build a name for yourself and be known not just for having the best brownies but ones that come in an excellent package, too!

These are not the only benefits of business outsourcing, but they'll more than do for a start, don't they?

By Dian Herdiana

Business process outsourcing used to be exclusively implemented by manufacturing firms but today, even service-oriented firms have been benefiting from them.

Business process outsourcing or BPO refers to activities or functions that are contracted to a third party to reduce costs, improve productivity and efficiency, and achieve greater innovation.

Types of Business Process Outsourcing Various functions of a business can be outsourced. What they are will depend on your company's strengths and weaknesses and its projected benefits.

Customer Relations Management
This is arguably the activity that's most commonly outsourced by both manufacturing and service-oriented firms. Indeed, a huge majority of the BPO industry is composed of call centers specifically tasked to handle customer relation needs of client firms.

Equipment
Rather than invest in equipment that they will only occasionally use, companies prefer to outsource their need for expensive equipment by renting them instead. Whereas outsourcing agreements are commonly long-term for customer relation activities, outsourcing equipment needs are commonly done on a per-project basis.

Finance and Accounting
In dynamic and highly competitive industries, companies need to focus more on product development and whatever aspect of their business that serves as their core competency. Because of this, the company has lesser time to concentrate on administrative functions like finance and accounting.

Most companies choose to outsource finance and accounting functions to continue devoting most of their attention in improving organizational strengths.

Human Resources
One of the best examples of outsourcing human resources activities is the Bank of America. For quite some time now, the well-known banking company has relied on Exult, a BPO human resource vendor, for all its HR needs.

HR management is not something that just about any manager can handle as it deals directly with people and all related issues. Recruitment, compensation, and performance evaluation are just some of the many key activities in HR that have direct impact on an organization's ability to achieve its goals.

Logistics refer to the management process of all materials and goods used and produced by the business. Typical functions making up a company's logistics include but aren't limited to product allocation, scheduling, and forecasting, inventory control, and order entry.

A small fashion designing business may choose to focus on designing products and then outsourcing its entire logistics needs to a BPO vendor that's well-versed and more experienced in handling such activities.

Supply Chain Management
Also known as SCM, this process involves the planning, implementation, and control of supply chain functions. Logistics is a part of supply chain management. Common problems in SCM include distribution network configuration, inventory management, integration of information, distribution strategizing, and cash flow management. For companies to enjoy success in outsourcing their SCM functions, they must be prepared to involve their partners in local and central activities to a certain extent.

Security
Finally, most companies nowadays choose to completely outsource their security needs, regardless of their preference for automated or human-managed security. Security is a highly specialized field. An advertisement firm would hardly know, for instance, what the best security measures are in cases of break-ins.

By outsourcing security needs to the appropriate BPO vendors, companies are rest assured that their assets are under strict protection of professionals. No longer having to worry about security concerns, companies may then concentrate more on other and pressing activities.

Business process outsourcing is not exclusive to big businesses and corporations. Your small business can benefit from BPO, too, if you know the right activities to outsource.

A proposed solution to ease the negative impact of outsourcing in the USA and other countries.

Synopsis

In recent years, American corporations and companies of all types and sizes
have benefited from sending their work overseas to lower-cost of their
operations. It is estimated that as many as 200,000 service jobs could
be lost each year for the next 11 years.

Does this mean that to get cheaper cost of products we will allow the
exploitation of minimum wage in the USA and indirectly violate our basic
human right of deserving meaningful employment in the USA ?

Here are some impact points of outsourcing and proposed ways to address
this issue to provide much needed relief as we struggle to handle this
situation for ourselves and the next generation to come.

Outsourcing & Proposed Solution

The origin of outsourcing in America dates back to the 1970 when a major
corporation developed its IT industry in India. Somebody had figured that
instead of paying somebody $10 an hour in USA, it would so much cheaper
to pay a foreign worker less than $2 an hour so as to produce a product
that will cost much cheaper and increase profit margins to boost a company
chances to succeed. By cutting costs and increasing profits they started
the ball rolling to effectively lower the American standard of living.
The impact of this trend affects American students, who spend a fortune
to get an education in America to seek employment in America, only to find
themselves being displaced by foreign workers.

This, my friend, is perfectly legal to do and from a capitalistic vantage
point. This model is good for doing business and boost profits. This trend
will continue because the cost advantages given to the citizens are simply
hard to ignore as nobody is thinking about the long term impact on their
own lives. The damage to society, and to the economy, in the long run may
greatly outweigh the short-term benefits of outsourcing currently experienced
by businesses today.

Outsourcing in the USA. needs reform to give back to its citizens,
in another way, what they are taking away from them.

The impact points and suggested solution for outsourcing are as follows:

1. By turning a blind eye towards the impact of outsourcing,
the US government is not honoring its own policy about minimum wage. If
a worker is removed because an employer could get the same work done for
much less than the minimum wage, then the minimum wage law has been violated.
Because by not having a job this worker is now even below the wage system,
so why not just pay him the same and bring down the standard of living
in our country to the one that we are outsourcing our jobs to ? Because
having any job will be better than not having one. We know that this strategy
will not work and hence is not an option that will provide a solution to
this problem.

2. It is discouraging to know that addressing the negative impact
of outsourcing is not one of the top agenda of any political candidates
trying to woo people to vote for them into office for 2008.

3. The workers who are losing their jobs to outsourcing are being
made to train their replacement if they wish to receive any exit benefits.

4. Very soon USA will not be able to manufacture small items
such as shoes or nails because we will have killed our entire industry
one sector at a time.

5. Outsourcing is not one person's fault, it was brought into
existence because US citizens wanted to get paid high salaries but did
not believe in paying higher prices for their American made better quality
products. Instead they started to accept lower quality products at substantial
lower prices. Hence this imbalance encouraged industries to provide lower
quality products that are made overseas. The Americans did not see this
one coming, as their prudence to save money and get a good deal ended up
costing them in the long run. To feed this trend, industries started
to disband local shops to produce goods outside the country and offer lower
prices that the people were interest in paying.

6. Here is my proposed solution. Nobody seems to have presented
this as an option to the American people. The employees being outsourced
who do not have another job lined up to support themselves and their family
can seek some relief from this outsourcing situation. For every 100 jobs
that will be outsourced, corporations should be required to reserve 25
(25%) of them to allow US workers to take those jobs by being able to obtain
a work permit to the country of destination.

Not everybody will take this opportunity to pick up this position and
live in another country. But those who will be hurting the most and are
willing to try something new will be wiling to do so. This will reduce
the impact of unemployment due to outsourcing and rehabilitating
displaced workers will be much easier than having to retrain them for another
profession.

The downside of this move will be that the workers accepting such positions
to work overseas will have to accept employment at the wage rate as the
ones at the same level in the foreign country. Not a point of major concern,
I hear these IT workers are paid very handsome based on the cost of living
in that country. US companies have to write this up as part of the contract
before transferring work to their country. This will be similar to how
people from all over the world came to USA to work. Now it is time to reverse
that flow of workforce to allow people to be move where ever their job
takes them.

7. Here is another unusual way to help reduce the cost of producing
goods in the USA. A noteworthy observation of outsourcing has been
that I never hear about management in corporations that have been outsourced.
If it is about lowering the cost of operations, then those
that are demanding the highest salaries in a corporation need to be targeted
first. This is something that will give the most benefit to cost cutting
in any multi-stacked management style organization, typically seen in American
corporations. But it is no secret why this has not happened yet. Who makes
the decision to outsource and displace those who have no say in this matter,
you got it, its management. Therefore this suggestion is at least unworkable
at this time, but it is an idea to look at seriously as a corporation looks
at new ways to get leaner and shed some of its major expenses.

8. The career paths of the next generation of Americans can be
sustained by training them appropriately. Our children should not pick
professions that can put in a box and shipped abroad for processing. Hence
they need to become professionals who can provide services locally, namely
plumber, electrician, doctor, auto mechanic. You can see where this is
going. Anything that cannot be shipped overseas is what we need to do.

9. On the flip side, it has done wonders for the countries where
America has outsourced our jobs to. They have gotten to use our products
and designs. They have created a market for our products and western culture
that allows them to bring their standard of living to match ours. They
enjoy thinking like us and living our lifestyles which will automatically
encourage them to demand higher pay scales. If all this goes in the right
direction we will have raised the world standard of living in countries
where we have outsourced our work.

Pardon me for being politically incorrect but candidly truthful.
What I have presented is based on the facts that are affecting the lives
of people in the USA. If you neglect the signs of change now then it will
consume us and affect our family's future as well. So let's do something
about as it is not too late to help ourselves.

Comments

Being a capitalist economy, it has always been about making $$$, raising
profits for self gain. But, when did our corporate leaders stop caring
about the future of the American families and the generations to come?
Why we are hell bent on reducing our higher standard of living and reduce
the quality of life that we had in the USA.

Through outsourcing the control of a process or a product is transferred to a third party service provider. These providers may provide the services at a remote location or at the same place - whichever is more convenient, and more importantly, more cost-effective for the company. If utilized correctly, your company can benefit from the advantages of outsourcing.

Advantages

There are plenty of advantages of outsourcing. These valuable services should have both tangible as well as intangible benefits, which may include the following.

• Outsourcing allows the company to work on an ongoing basis. They do not need to focus on a single project. By outsourcing some of the processes, they get more time and freedom to concentrate on other projects.
• Another great thing about outsourcing is that it can look after the ancillary functions, and thus, allow the organization to concentrate on the core business function. This eventually optimizes the growth of the company.
• One of the greatest benefits of outsourcing is that it reduces the operating costs of the organization by taking care of the various secondary processes. When a third-party service provider handles the supporting portions of the business operations, the company always has its capital funds available for the major core business area.
• Outsourcing of the various processes to a third party service provider also helps the company to improve their productivity as well as service. They get an easy way to standardize all the processes and operations. The outsourcing vendor takes care of the global portfolio as well and while doing so actually increases its lifespan too.
• One of the most important benefits of outsourcing is that the company gets an easy access to world-class capabilities, which you can use to support your business.
• Any organization can save up to 25% of the cost by outsourcing some of its major processes.
• It does not only increase the productivity, but it also reduces the amount of risks involved.
• In this modern competitive world, it is very important for any organization to be fast and active in order to adapt the changing circumstances while making the best use of the same. And, this is where outsourcing plays the most important role because the benefits of outsourcing also include fast work processing and sharing of innovations for best practices.
• Even if the company goes through some uncertain phase, outsourcing can help it make the best use of all the resources available. Outsourcing provides ultimate flexibility with beneficial facilities, and this gives a competitive edge to the organization.

There are plenty of additional benefits of outsourcing as well, such as improved customer satisfaction, effective cost management, project enhancement, and much more. If you believe that your company can benefit from the advantages of outsourcing then what are you waiting for?

The topic of outsourcing has become a hot election debate in the US with the race for presidential election picking up. Never before was Outsourcing so widely debated as is being done today. And interestingly enough everybody has his own perspective, his own judgment. But for the management of corporations and owners of small businesses for whom Outsourcing today is not a mere option but a regular business strategy to achieve organizational goal of growth and efficiency, the million dollar question is whether to outsource or not?

To put it plainly, although there are multiple advantages associated with outsourcing any
process, the benefits accruing to different clients will always differ. Companies are getting up to the fact that its not simply outsourcing a process and get relieved kind of thing but competencies to develop a relationship with an outsourcing firm, and trust on their methodology that matters the most.

So what are the principles that should propel a decision on outsourcing?

1) Why to outsource: This should be the most important criteria in assessing whether to outsource or not. Outsourcing decisions prompted by short term benefits or as a stop gap arrangement will definitely not reap much benefit. Worse, such decisions created in pressured environment like general crisis of the company, transfer the desperation element to the third party vendor and often the entire process collapses even before it has started. Proper analysis with relation to cost, benefits, flexibility and risks involved should be done before starting the actual process. Like every strategic decision which takes time to reward the business, a well thought of outsourcing strategy gelled with the company's strategic plan is sure to be successful and rewarding.

2) What to Outsource: Before embarking on outsourcing decision it is advisable for the organization to know which functions are most important to the organization and whether or not the company needs to retain administrative control over those functions to ensure quality results. One thing that needs to be understood here is that outsourcing the duties does not necessarily mean, the outsourcing of responsibilities. An organization needs to do a clear SWOT analysis before deciding what to outsource. This means it should always retain its core strengths for the in house staff and outsource non key functions like accounting.The following points should be taken into consideration before deciding what to outsource:

Core competence: Core competence and processes which give clear advantage over its rivals, should never be considered for outsourcing.

Process which is heavily dependent on physical infrastructure: Such processes should be the first to be considered for outsourcing as it will save precious resources for the business.

  Process that are non value adding and demand specialized skills like accounting should be considered for outsourcing.

3) Selecting your outsource partner: Again due care should be taken to select your outsource partner. You need to evaluate him on his expertise, experience and capability before making a final decision. It is highly recommended that several outsource service providers be screened before arriving at your prospective partner. Once a decision relating to this has been taken, all referrals provided by the vendors should be verified to establish their authenticity.

4) How to Outsource: The most important thing to realize in outsourcing process is that often staff of the outsource service provider do not have the familiarity of how individual business work for their clients. It is therefore needed that clients establish a mentoring relationship with their vendors and be patient with initial mistakes. Communication and reporting by the vendors staff on a regular basis can do wonders for a healthy relationship at this stage.

Benefits of outsourcing are many. However a careful and patient approach all the way from the conceptual stage till the transitional and maintenance phase ensures that it is really fruitful for the organization and delivers on its real promise of reduced cost and better resource allocation.

When two parties decide to cancel their agreement, both will be affected by this decision. In an outsourcing project, it is under most circumstances the sponsor who will decide to break the contract. This is always a difficult decision. Breaking the contract too early could mean a lack of commitment, but waiting too long may cause even more harm, for either parties.

The start of such an outsourcing transition is a phase where the contract has been signed and where the sourcing partner starts to configure their systems according to the requirements that have been outlined. The project / transition has really started…

During such a phase there will always pop up issues that haven't been addressed in the contract. When such an issue-list becomes too large, the project becomes unmanageable and it is better to call it off. Under what circumstances this should be done is hard to say and specific for every situation.

Examples of problems during such a transition are:

• lack of functionality offered by the sourcing partner. The sponsoring party will feel that it will loose too much functionality. This issue must have been addressed somehow in the contract, but a project on paper is different from a project in real life: people will feel what the lack of functionality will mean for their business. Standardizing is one of the issues here. A sourcing partner must offer standardized functionality so it can reuse similar components on a larger scale and to other companies. Otherwise, it is not in the interest to start the in-sourcing. The outsourcing partner must be aware of this
• Time-to-market. During a transition delays are an indication of the time-to-market of the partnership business. This comes from both sides, but is one of the indicators that shows the success of the partnership.

Somewhere along the line someone has to take the decision to call it all off.

The sponsor, who started the outsourcing, should manage the incident and should report the problem to the rest of the organization. There is always a cause that gets communicated, but one should check whether it is the real cause. Outsourcing affects the organization which causes stress. Was the change well managed? Were people not informed about the changes? It is possible that the resistance to continue the outsourcing grew over time during the project?

Take your loss means also that this problem must get addressed. Blowing the whole thing off doesn't solve the problem the organization was dealing with. The decision to outsource requires a cultural change from "Do It Yourself" to "Manage A third party." The new dilemma now is whether this was a management problem - the transition could not be managed - or really the problem of the sourcing partner (not able to offer the right functionality, time-to-market and on budget).
This is one of the main issues and if this doesn't get cleared out, the organization will drag the same management problem with it.

Take you loss solves the investment problem. It doesn't solve the management problem. How do you know whether you will not make the same mistake again? If it was the first time than it is all part of a learning process. If more outsourcing projects have been canceled, it might be a symptom of a more profound problem.

In either case it affects the image of both parties. The sourcing partner will have a negative publicity towards new projects and clients, unless it is able to communicate the problem and learn from it. It is very likely that the sourcing partner is able to solve the problem and use the knowledge of the "failure" in next projects, so this gives the organization more experience.

The Sponsor will have to deal with a new problem. What now and how does this affect our strategy?

The economic situation (outlook) could also have influenced the failure. Many companies decide to outsource as part of a growth strategy, not only on refocusing their business. When the forecasts change this could impact the strategy and negatively influence the sourcing decision.

H.J.B.

There has been a lot of talk about the pros and cons of Offshoring and Outsourcing. This is because of the fact that you can actually get bigger profits while saving a lot of money in the process. Offshore call centers have already proven that. Such strategy enabled companies in the US to save millions and give jobs to economically challenged countries therefore reducing dependency to US financial aid. It is a win-win situation for both parties and here we're going to break down the good things about offshoring and outsourcing into 3 points:

1. Lower priced goods and services - cheaper cost of production means lower priced goods and services. If the client company is able to save $20,000 on production cost, the product can be readily made available at a lower price. Lower price for a commodity means the people have greater purchasing power thus the number of products that gets into the hands of consumers tends to get bigger. Profit is earned at a lower cost. That is what's important in any business venture. Offshoring and outsourcing makes that seemingly simple business logic (but so hard to fulfill sometimes) definitely possible.

Let us take for example customer service or tech support: In the US, you can save up to 50% cost by hiring a Filipino college graduate as compared to an American tech support employee who probably has lower education qualifications than his Filipino counterpart. Saving cost and giving out jobs to places where it matters is one of the plus sides of offshoring services. In short, it's getting higher quality workers and at the same time, cutting back on cost. These two ideas seem far from each other especially when talking about basic marketing principles but this is entirely made possible by offshoring and outsourcing.

2. More sophisticated jobs - Outsourcing jobs will move less important jobs out of the client company therefore creating new sophisticated ones. This will require higher qualifications thus pushing the country to educate its citizens more and focus on improving the quality of their own employees.

Doing call center jobs for example, requires patience and the ability to get your point and message across without resulting to an irate customer, now if these jobs are offshored and outsourced, then future employees will have more challenging and fulfilling jobs waiting for them. The focus now would be on improving more skills and creating higher quality employees. The effect will reach farther than the scope of the company and would prove to be beneficial on a wider scale.

3. Focus on core functions - In business functions, depending on the nature of the business, what's usually the unnecessary added worry is the Customer Service part of the business function. If we outsource this, we reduce added risk and worry and can focus on more important aspects such as Research and Development, Production/Operations, Finance and Administration/IT. Most client companies employ customer support employees from other countries to reduce the cost and then give more funds to Research or Marketing. This is a wise and logical move that delivers better results at a lower cost.

In offshoring and outsourcing, good things just keep coming. What's amazing about this is that you not only get to cut your costs but you are also able to provide jobs for developing countries while raising work standards in your own company. Results are seen through lower priced goods and services, refined job opportunities and development of your company's core functions.