Every thing you do is fraught with risks. More so when you are running a business. Definitely so when you have outsourced some of the operations of your business. Take cognizance of this fact. The key to mitigating the risks associated with outsourcing is to first, identify those risks before taking the decision to outsource. The risks should be examined closely and their effects on your business should be assessed and quantified. This should be factored into the revenues of your business before you take the decision.

If it is imperative that the tasks identified are outsourced, then take the initiative to prepare a back-up plan to take care of any contingency.

Let us have a look at some of the problems with outsourced jobs.

* Locational issues - When an outsourced job is done offshore, there are issues to consider like the local language spoken, laws of the country, restrictions in trade, political regime ruling the country, issues of cultural differences and most importantly, difference in time zones. The areas to where the jobs are outsourced should not be disaster prone zones. Earthquakes, typhoons and other natural disasters can play havoc with your business when you have outsourced jobs to such locations.

* Issues with infrastructure - Almost all the big businesses have off-shore operations. With threats of terrorism looming large, break-up in communication lines is one vital issue which should be recognized. Before deciding to outsource, take into consideration, the availability of communications and power facilities in the off-shore zones. It is imperative that connectivity has to assured 24/7 for 365 days of the year.

* Service provider related issues - When locating a service provider, it is vital to check the background and experience. It would be best to go slow initially. Observe the service provider's capacity to deliver, quality control and time management. Expectations from the service provider have to be clearly communicated. Once a task is outsourced, it does not mean 'out of sight, out of mind'. An element of control has to be maintained to check if expectations are met. Feed back to the service provider is essential to keep the tasks outsourced, on course.

* Human Resources related issues - People make a company. The Human Resources available with a company have to be kept in mind when tasks are outsourced. It pays to keep your eyes and ears open. Reports of high turnover will derail the execution of your outsourced tasks.

* Security related issues - With reports in the newspapers of frauds and leakages of information, it is necessary that contracts are drawn up to include damages in case of lapses in security. Performance guaranteed contracts are one way to deal with this issue.

There are countries like India and China where much of the work is being outsourced to. Companies which have outsourced to these countries are aware of the problems and the associated risks when doing business in these countries.

Risks are normal and it would be best to take preventive measures to avoid risks. Close monitoring and clear communication would go a long way in preventing problems with outsourced jobs.

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 Christy Taylor

Simply put, Business Process Outsourcing is getting another company to handle some of your activities for a payment. The concept made its way into the corporate world in the 1980s. Initially, payroll functions were handed out for outsourcing. Then companies included the management of employee benefits for outsourcing. It is now common place for Call Center operations, Finance and Administration functions, Accounting, Customer Service related activities and Human Resources related activities to be outsourced. Presently, activities of a company which are considered as 'non-core' to the running of the business come under the gamut of activities which can be outsourced.

Business Process Outsourcing allows companies to invest their surplus manpower, time and money, freed by the process of outsourcing, in carrying out core business functions. This helps companies to grow fast, as precious resources are not tied up in non-productive activities. It is easier to identify jobs which can be outsourced. In the process of outsourcing non-core activities, a business becomes efficient and productive. It is seen that Business Process Outsourcing frees up capital of a business, which otherwise is tied up in carrying out non-core activities. This capital can be redeployed in the business.

At this juncture, it should be understood that Business Process Outsourcing and IT Outsourcing are different. The former involves outsourcing of activities which are not the core activities of the business. Development and management of applications, Data Center Management, quality control and testing are some of the activities which come under the umbrella of IT Outsourcing. These IT related activities can be handled by service providers or IT companies.

Outsourcing contracts normally run for a long period of time and involve huge amounts of money as contractual payment. Transfers of persons working in the company on the outsourced activities to the service provider can also happen. Some of the companies which have made a name for themselves in Business Process Outsourcing are Cap Gemini, Indian companies like Wipro, TCS and Infosys, and Companies like Accenture and IBM in the USA.

A number of the Business Process Outsourcing companies are based offshore. This means that the company doing the outsourced jobs for you, carries out these jobs in another country. India, China, Russian and Malaysia are some such offshore countries where Business Process Outsourcing companies are facing boom time. Business Processing Outsourcing companies are also synonymous with Information Technology enabled services or ITES. Knowledge Process Outsourcing (KPO) is the latest concept in the business world. Those jobs which need education, knowledge and skill to be handled can be handed over to KPOs.

Some of the problems in the field of Business Process Outsourcing are the increasing reports of information on customers and internal processes of companies being sold in the open market by employees of the service providers. This creates security risks and has detrimental effects on the company which has outsourced.

With the growth in outsourcing activities, there is also a growing resentment in the USA and UK (countries which have done the maximum outsourcing) against the loss of white-collar jobs in these countries. These issues have to be sorted out along with the risks associated with Business Process Outsourcing.

By Christy Taylor

'Outsource' has become a buzzword in the business world, globally. Slow growth in economies is forcing businesses to outsource, in an effort to bring down costs. However, bringing down costs is not the only objective of outsourcing. When you outsource there are two immediate benefits that are gained. The first one is cost savings and the second but more significant gain, is the freeing up of precious human resources and tied-up capital to concentrate on core competencies. Further, when you outsource you are open to enhancing operational efficiency. You get the opportunity to get the best in the business in terms of skills and experience.

The decision to outsource is easy. But to make the choice on which tasks to outsource is the tough one. You obviously cannot outsource tasks that have a direct bearing on the business and its bottom line. The decision should be guided by the nature of your business.

Picking out the tasks best suitable for outsourcing and assessing those tasks which will optimize your revenues is the hardest part of the decision. All tasks are not suitable candidates. Before you enter into an agreement to outsource, determine which tasks could be outsourced. The criterion for helping you make the decision include the magnitude of the task, the skill sets required, available resources and the investment required.

When you outsource, it gives you the opportunity to evaluate whether the performance on the task outsourced is better inside or outside the organization. There are many organizations that require their in-house departments to bid for tasks along with the service providers from outside. Through this process, efficiency can be assessed and suitable remedial measures taken.

While outsourcing is one option to achieve focus and strategize your business, it cannot be said that it always delivers. It needs to be remembered that when you outsource, you may create a competitor and you also lose the ability to learn and innovate. A business is responsible for all actions before outsourcing. However, when such actions are transferred to the service provider, the business may lose initiative. Therefore it is imperative that the business closely monitors the performance of the service provider and communicates the needs of the business in clear-cut terms. The increasing incidents of frauds and lapses in security in outsourced activities are a cause for concern. There have to be checks at various points to ensure that these things do not happen.

Quality cannot be at the cost of bringing down costs. The old adage 'Penny wise Pound Foolish' would apply. If quality of a product or a service that is outsourced is compromised, it will have direct bearing on the business. Customers who are the mainstay of any business will walk away to your nearest competitor who can give them value for money. So when you outsource, do not turn lax and expect the service provider to deliver all the time. It pays to be cautious.

There is an increasingly divided opinion of the benefits of outsourcing. However, the decision to outsource should be carefully made and viewed with the right perspective.

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.