Outsourcing benefits are not only limited to its cost-related advantages. When managed correctly, outsourcing can also improve business processes and address critical business and market issues that are otherwise impractical to deal with. The steady growth of the global outsourcing industry opens up more opportunities for businesses to improve the use of their corporate resources amid growing competition and unstable market conditions.
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One of the notable benefits of outsourcing is access to better business resources, primarily human and technological resources. By outsourcing to reputable contractors, companies can gain access to a high-caliber workforce that is not readily available otherwise. Contractors serving the high-technology sector have technical advantages which they learned from working with several companies. The same is true as it relates to human resources. The existing workforce of contractors can be in a better position to perform specific functions, especially jobs which do not directly support the core business of a company.
Perhaps one of the most significant benefits of outsourcing is having working hours and cash reinvested in commercial activities that bring the highest return on investment.
Outsourcing leads to the improved use of corporate resources as it allows companies to focus on their core business operations. For instance, outsourcing clerical and secretarial tasks will free up more resources to be used for profit-generating processes. The demand for back-office support is increasing as more companies realize how much they are losing by not focusing on their critical business operations. General practice clinics, for instance, outsource their medical transcription operations so they can employ more medical staff.
Depending on the line of business, IT-related functions can unnecessarily take away considerable corporate resources. Web hosting providers and cloud-based services are great examples of how outsourcing can promote efficient use of in-house resources.
Using third-party technologies and business methodologies makes companies more prepared to deal with technological obsolescence. By leveraging technological investments and human resource acquisition, outsourcing can increase the technical capacity of an organization.
The benefits are also evident in supply chain management.
Offshore staff leasing solutions can provide an integrated supply chain, connecting suppliers, partners and customers in the most efficient way possible. The benefits of outsourcing can be in the form of better procurement and logistics operations or standardized processes that improve the relationship with supply chain partners.
Getting through regulatory obstacles and legal liabilities is possible through outsourcing.
Every business decision carries risk, which is aggravated by dynamic market condition, technological changes, government legislation and economic trends. Outsourcing makes risk management less costly and less challenging.
Long-term planning is made easier with outsourcing.
Working with contractors is essential in achieving long-term strategies. Workforce acquisition, training and the technical preparations for expanding business operations become easier with outsourcing.
Yearly inflation will fuel the demand for cost-cutting business solutions.
As innovations increasingly play a more significant role in surviving global competition, offshoring staff solutions will steadily grow for sure. By removing non-core assets and making financial predictions more accurate, outsourcing can boost the financial strength of the organization.
Outsourcing jobs is a matter that companies should not take lightly. An essential human resource issue is deciding whether or not to outsource particular tasks, especially for new and start-up businesses aiming to make a mark in their respective industries.
Indeed, job outsourcing could be a strategic tool for building your business more productive and profitable; that is, if your business needs it and if you know how to make full use of its benefits.
So which aspects of your operation should be done in-house and which should be delegated to job outsourcing companies?
This is a critical strategic decision that may be critical in determining your business success.
The rule of thumb on this matter is this: elements of your business that are critical to generating profit and achieving a competitive advantage should not be trusted in the hands of people outside of your organization. As such, the very first thing you need to do before engaging in job outsourcing is to identify the critical aspects of your operations and set them aside as mission-critical and therefore “none-outsource-able.”
After this is done, then you will need to determine which among the remaining jobs in your company involve routine tasks that waste valuable time and energy and that people don’t particularly enjoy doing. Also, identify the seasonal functions that are not regularly done or are done only when the need arises.
Once you’ve pinpointed these, then it’s time for you to do the math. You have to make some computations and determine whether it is less expensive for you to do job outsourcing for these tasks than to get full-time employees to do the work. In doing this, you should take into consideration the employees’ basic pay plus fringe benefits (as well as other peripheral expenses like office equipment and supplies) vis-a-vis the cost of outsourcing the jobs. Once you’ve done all these, you will then have a clearer idea of which jobs should be outsourced or not.
Job outsourcing is a practical option for almost every aspect of a company’s operations–from data encoding, outsourcing your payroll, accounting, and copywriting to product manufacturing, employee training, IT managing, technical support and customer service. Outsourcing jobs enable you to invest your time and resources into more critical and more profitable activities.
Although the recent economic recession had a negative impact on the business of several BPO providers, there are still irresistible benefits of business outsourcing during such a hard time. Recession ironically created a demand for some BPO services. Companies that laid off several employees resorted to outsourcing to continue their operations on a smaller scale.
A survey by Odesk, an online marketplace for outsourcing services, showed that smaller businesses were taking advantage of the cost benefits of outsourcing, saying that they would continue outsourcing jobs despite the economic downturn.
- More than 40% of the 600 respondents said they planned to outsource more.
- Seven percent cited layoffs as the main reason, while 35% would resort to outsourcing because they couldn’t afford to hire full-time staff.
- Almost 30% planned to outsource specific works for the first time.
Despite the global economic slowdown last year, 14.6% of the respondents said they had resorted to outsourcing, while 14.5% partnered with a contractor who would otherwise be unemployed or severely hit by the recession.
The financial benefits of offshoring are hard to ignore during the recession.
During the onset of the recession, the demand for outsourcing increased, according to a survey conducted by InfoWorld. The survey asked more than 200 outsourcing firms, including Atos Origin, IBM, Accenture, and Infosys.
- Around 40% reported that the demand for their services was higher despite the economic slowdown.
Demand was notably stronger in European countries than in North America.
- Sixty-four percent of European respondents reported seeing increased demand for their services, compared with 25% among American providers.
- However, the adverse effects of the recession were undeniable, with 38% citing it as the primary reason that prompted their client to defer outsourcing efforts.
The survey also revealed that outsourcing was becoming increasingly focused on delivering a quick return on investment, thus replacing long-term action plans to improve business processes.
The term ‘over-outsourcing’ has become a buzzword during the recession, especially in the U.S.
As struggling companies take advantage of the financial benefits of human resource outsourcing, some American economists attribute the slow recovery of the local economy to the lack of domestic jobs. Some Americans have negative sentiments on outsourcing as it takes away positions from them.
There are economists on the other hand, who believe that the economic benefits of business outsourcing will also be enjoyed by prosperous economies as well. They argue that although low-wage countries are creating more BPO jobs at the expense of the rich countries, this practice will help industrialized countries run a more efficient economy by prompting them to focus on high-value services that are not easy to outsource.
Outsourcing Jobs Toward Long-term Business Partnership
Outsourcing jobs overseas would be more productive and manageable if there is a robust vendor-client relationship. Outsourcing jobs to just one service provider, in the long run, will prevent costly interruptions in business operations. A long-term BPO partnership can contribute to the client’s strategic growth plan by minimizing risks associated with new alliances.
Do not hesitate to invest in the vendor’s business by contributing time, management resources, money and human resources. By outsourcing jobs to a BPO vendor where you have invested considerable resources, you can increase the success rate and level of satisfaction. This will also nurture a mutual dependency between you and the vendor.
Develop effective training programs and clear performance evaluation metrics to help your BPO partner achieve its performance goals.
Close collaboration between clients and service providers will reduce the time frame and costs of knowledge acquisition and productivity improvement. Moreover, monitoring every aspect of offshore operations will prove helpful in solving operational difficulties.
Develop a detailed offshoring plan.
When outsourcing jobs, it is not enough to define the starting point. Effective outsourcing goes far beyond identifying what is to be outsourced. Remember that your strategic goals should be communicated to the contractors for them to position their resources to deliver value-added service accurately.
An ideal outsourcing plan should detail how the BPO contractors should manage the transition and human resource training. Methods for setting up the right workflow and IT system should also be laid out. The problem with some clients is that they think of BPO as a sort of pre-packaged solution that will instantly deliver cost savings. Many BPO contracts get canceled because value-added services are not provided as expected by clients.
Nurture partnership by appointing an offshoring relationship manager.
This officer should be in charge of liaising directly with the offshoring provider. There is a growing demand for outsourcing relationship managers as offshoring becomes more complex and unpredictable. To be considered as the ideal candidate for this position, the person should have strong IT skills, close relationship with executives and the ability to sell and negotiate.
Poor BPO relationship management increases expenses by 5-25%.
This aspect of BPO management is one of the most ignored. Outsourcing jobs without having a good vendor relationship model are likely to fail.
- A study showed that 50-70% of business relationships did not meet their objectives mainly due to the weak correlation between partners.
- A separate survey conducted by the Outsourcing Institute showed that 40% of buyers and vendors consider continuous management of business relationship as vital for successful sourcing.
Offshoring will continue to pose new challenges in the years ahead, but active management can minimize the impact. Building a long-term partnership will reduce the need to adapt to new partnerships and provide a strong foundation for business expansion.