Outsourcing - BPO
Making a Decision to Outsource: Driving Factors
Most executives view offshore outsourcing most of all as a source
of cost reducing. The greatest savings are expected to come from
lower labor cost and reduced project timelines. However offshore
outsourcing also creates new challenges and expenses for the organization
involved. Those may include vendor selection costs, legal costs,
costs of transition and many others. That is why despite the evidence
of possible major up-front cost savings many outsourcing vendors
have yet to prove that they are able to provide positive ROI in
a complex project.
Yet businesses have to perform deep analysis of its strategic
program and goals before making a strategic decision to outsource
part of their activities. The main driving factors are as follows:
Lack of special expertise/knowledge. This is probably one of
the most important factors that force companies to outsource.
Many projects require technical expertise that is not present
within the company. Moreover, very often the company can not hire
employees with required expertise, or it is not reasonable to
employ them full-time. As Outsourcing Institute has suggested
“outsourcing is a clever alternative to hiring”.
Floating demand for personnel. Often a company that engages itself
into a large project is reluctant to search for new skilled employees,
because it estimates that upon its completion it will be forced
to discharge them (say, in a year or two). It is wise in such
case to outsource part of the project to an offshore vendor acquiring
also the possibility to reduce costs.
High risk level. Companies working in high risk spheres often
prefer to reduce them by finding an offshore vendor with advanced
expertise in the same domain. Also it is not reasonable to shift
all responsibility to outsourcing partner, attracting mature specialists
with needed skills and technical knowledge in most cases allows
reducing risks.
Process management perfection. Outsourcing vendors earn their
profits in many respects because they have standardized their
internal processes. Take the example of software developers who
integrated Capability Maturity Model raising their processes from
ad hoc, chaotic level to mature, disciplined software processes.
Partnering with such mature organization may allow for transfer
of best practices across project boundaries, thus providing some
standardization for the outsourcing organization as well.
Reduction of time spending on management. Transferring secondary
functions and processes to outsourcing vendor will allow management
of the company to concentrate on core processes and projects that
have maximum priority.
Achieving objectivity. Often companies fall into the trap of
inertness of its workers. The reason is that people minds can
not manage with rapid technological changes and employees are
reluctant to refuse “old approved techniques and methods”
thus being not able to find and apply optimal solutions. Internal
obstacles may delay or even block new initiatives. That is why
it is worth recruiting independent expert company that will suggest
the most appropriate solution for particular business needs.
The company shall clearly recognize all possible reasons for
outsourcing and rank their priority. A coordinated approach of
management must be formed, in other case valuable time and resources
may be spent on finding a vendor whose effectiveness will not
satisfy one of the managers. As practical experience shows main
reasons for resorting to outsourcing are:
- increasing the overall company effectiveness;
- expanding technological advantages and manufacturing capabilities;
- cutting managerial costs;
- improving technical support and customer service;
- concentration on core activities;
- lack of qualified personnel;
- etc.
Probably the most important point to keep in mind while making
decision whether to outsource or not is that outsourcing is not
the means to solve all company’s problems. All problems arising
within the company require careful examination. If their cause
is badly defined strategic aims, outsourcing is likely to worsen
the situation, not improve it. If a company does not realize its
needs, it will neither be able to explain them to exterior vendor
nor gain success.
Will outsourcing be really profitable for your business? It depends.
In first place it depends on you and how much effort you put into
pre-outsourcing preparation and analysis. We hope that this article
will help you to identify your needs and acquire more clear vision
of possible reasons for outsourcing. If you are still not sure
and hesitating, you may contact us, and our analysts will definitely
help you.
Denis Syropushchinsky is a Marketing Manager in Qulix Systems
- Offshore Outsourcing Software Development Company, located in
Minsk, Belarus, Eastern Europe. Our client-oriented approach and
effective offshore software development services are the things
that will help you to achieve your business goals. If you have
further questions about offshore outsourcing, please contact us.
Copyright 2005 Denis Syropushchinsky. All rights reserved.
This article may be freely reprinted on your websites. We only
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