Outsourcing Companies – How They Can Help You

Outsourcing is the transferring of a business process to a third party vendor. The service provider will take over the responsibility of day to day function and continuance of the assigned process.

There are several varied kinds of outsourcing. Several companies outsource some degree of functions, while others outsource complete operations. Let’s take Microsoft for example; their total manufacturing process is outsourced. Obviously, fees are part of outsourcing depending on the services necessary, and in cases like Microsoft, the contract can cost millions and billions of dollars, and it becomes frequent for the client’s employees to be moved to the supplier company. Companies such as IBM, HP, EDS and Accenture are some of the foremost outsourcing companies offering their services.

Outsourced entire operations fall into two (2) categories: Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO).

The former is further sub-divided into call centre outsourcing (CCO), human resource outsourcing (HRO), finance and accounting (FAO) outsourcing, and claims processing outsourcing (CPO).

1. Information Technology Outsourcing (ITO)
a. Call Centre Outsourcing (CCO)
b. Human Resource Outsourcing (HRO)
c. Finance and Accounting Outsourcing (FAO)
d. Claims Processing Outsourcing (CPO)
2. Information Technology Outsourcing (ITO)

Basically, every business process can be transferred over to outsourcing companies. The most widespread processes that are outsourced are marketing and accounts, manufacturing, recruitment, switch board, web design and maintenance, web hosting and IT maintenance, logistics and distribution, and editing.

There are innumerable motivations why a business ought to consider outsourcing. Several firms may not have the on hand skills needed to finish a process, handing over this process to outsourcing companies may assure a higher success rate rather than if the business itself runs it.

A further motive is that the process may be hard to control, in general, or possibly due to business growth. Veteran outsourcing companies already have the essential abilities and familiarity to administer the process for you. Moreover, the process can be executed better, cheaper, and earlier too.

If a company has sub-standard in-house service, which may or may not be linked to shortage of skills, or occasionally, a company may be short of the resources, or the resources are not available in-house at all, in order to complete the process, such as the case for smaller companies. Outsourcing companies can present the best solution.

Further reasons may be that you need your employees somewhere else in the business and the process may not add to competitive advantage. Outsourcing assists companies to modernize their business operations by allowing them to spotlight on core income generating activities.

Outsourcing companies provides firms access to expert capabilities, therefore leveling the playing field for smaller companies.

It lessens risks by distributing it between the company and the outsourcing vendor – who has the skills and experience for administering the risk better, giving businesses peace of mind that the process is in high-quality and dependable hands.

With outsourcing, companies do not have to be anxious about continually commencing new technologies to keep them competitive. An excellent outsourcing provider will already have this covered for them. Outsourcing releases human resources, allowing companies to spotlight their employee’s activities on more critical tasks. Outsourcing releases cash flow by transforming fixed costs to variable costs. Moreover, it boosts service quality, improves the control of your business, and allows the business more flexible to change/demand.

The Biggest Advantage and Disadvantage of Outsourcing – To Outsource Or Not to Outsource

As more and more companies outsource some of their jobs to offshore companies, the question regarding the biggest advantage and disadvantage of outsourcing crops up in business-related discussions all over the world. In recent years, it has become simpler to outsource jobs overseas thanks to developments in technology specifically when it comes to computers and the Internet. Without a doubt, outsourcing offers plenty of benefits to companies. But it is also true that the trend has its own set of disadvantages. If you are concerned with the pros and cons, the advantage  disadvantage outsourcing presents, then you have come to the right place. This article is all about the advantage disadvantage outsourcing brings to businesses.

The biggest benefit of outsourcing is of course the monetary savings that it provides. Companies that have been employing outsourcing measures for quite some time now can attest to the big savings that the practice gives. Countries such as India and the Philippines are a treasure trove of cheap but good workers. In order for a business to grow, it needs to earn more than what it is spending. Let us face it, labor in the west is anything but affordable. And if you will stick to hiring professionals onshore, there is the big possibility that you will be left behind in terms of growth by your competition. While outsourcing is taking away jobs in the local front and taking them abroad, it also builds businesses. This is the reason why many economies, despite the perceive economic disadvantage that it brings, believe that it is a practice that brings more good than harm to the economy of the U.S.

The biggest disadvantage of outsourcing therefore is outweighed by its biggest advantage. It is best for companies to keep this in mind when trying to make a decision on whether to outsource or not. On a company level, outsourcing also presents some challenges that make others think twice about joining the bandwagon. For example, there always the risk of getting less than quality work when letting some company or individual offshore to do some of the important task of your business. Cultural and geographical barriers as well as discrepancies when it comes to communication technology can also present some problems for companies who are looking to have business “partners” abroad.

The best way to limit the risks and the challenges involved in outsourcing is to hire the service of a company that will manage outsourcing tasks for you. These companies are adept in hiring workers or acquiring the service of service-providers from other countries and are familiar with the ins and out of the practice. If you really want to get the most out of outsourcing, then getting an outsourcing manager is the key and it is actually the secret of many companies out there. If you want to outsource work without experiencing the hitch involved, then you must hire a professional that will manage your outsourcing work for you and your company.

Advantages & disadvantages, outsourcing has them both but there are things that you can do to minimize the bad effects and magnify the good ones.

The Impacts of Outsourcing

I am sure that many people have heard of the term ‘outsourcing’ and are well aware of it since more and more light is being shed on this issue. Also, I am sure that most of you know that it has an effect on America’s rising unemployment rate. However, what most people are unaware of is just how much this one issue contributes to America’s battle with putting its citizens back to work.

Outsourcing is one of the key factors In America’s current struggles with unemployment. Outsourcing is when a business allocates a process overseas to another company so it can reap the benefits of cheap labor and maximizing their profits. Today, America’s unemployment rate is 5.5% which has decreased since the great recession but will not stay that way if companies continue to outsource.

Hundreds of successful companies across the country use outsourcing to cut costs, and more importantly increase their profits. However, there is a great deal of confusion surrounding the term “outsourcing.” Simply put, outsourcing occurs when one company contracts with another company overseas to provide some sort of product or service. For example, a company may outsource their I.T. department to cut down on their labor costs. However, when a company builds a factory or store in another country and hires employees in that country, it is not necessarily considered outsourcing. In this circumstance the company may be trying to expand their market in order to increase their profits. The problem occurs when companies only look at the positive effects of outsourcing, and do not consider the negative impact it may have.

Out of all the countries in the world, the United States has the most companies that outsource to foreign countries. As technology advances, transporting products to outside sources has become a much more simple and affordable process. Outsourcing began as a harmless act of sending work overseas to exclusive firms. However, outsourcing has become one of the leading causes of unemployment among Americans. Not only does outsourcing affect the unemployed citizens of the United States, but it also affects the American consumers. With companies having their products made with lower quality materials overseas, the consumers know they are paying for a lower quality product. This results in a decrease in customer satisfaction. Even though companies may be receiving large profits for these low quality products, the decrease in customer satisfaction will eventually catch up to them. Today, consumers would much rather pay for something that they know is of high quality. Nonetheless, with the majority of American companies outsourcing, consumers come to expect a less than quality product.

Companies that are based overseas tend to lose customer loyalty because consumers prefer to buy from a domestic provider. Outsourcing affects the reputation of the company in other ways as well. For example, some companies choose to outsource production to countries where there are less strict child labor laws. Child labor activists have attacked companies, like Nike, who are known to use child labor in foreign countries to make their products. Even though Nike has generated substantial profits over the years using this strategy, they are now starting to face the repercussions of that decision.

Since outsourcing is becoming more and more prominent, it takes a major toll on America’s workforce. Because outsourcing is no big secret, American workers know that they are competing with foreign workforces on a daily basis. Having the fear of a potential layoff can have a negative impact on a worker’s morale. Not having any job security is very demoralizing and can often affect an employee’s work ethic. For these employees, being loyal to a company is not as important.

Not only does outsourcing affect the current workers, but it also affects the employees of the future. Studies have shown that outsourcing has caused a significant drop in college graduates due to a decrease in certain field’s employment rates. This causes a huge problem for companies that are looking to hire American college graduates. Companies who outsource also run into the problem of breaking the law. Some countries that companies outsource to have different confidentiality laws than those in the United States. If a company is caught violating these laws they may face severe consequences.

It is very clear that outsourcing has very few positive attributes. In the short term it benefits companies by diminishing their costs and generating more revenue. Yet what these companies are not seeing is the adverse effects outsourcing has on the United States in the long run. Unfortunately, it might be too late for some these companies to fix this outsourcing problem. Eventually they will become completely dependent on foreign countries. In order for this issue to be resolved, it will take a joint effort by our government and companies who outsource to begin to reverse these decisions and go back to having a dominant American workforce.

Outsourcing In A Nutshell

So what is outsourcing , you might ask.

After researching on text book, here are a few definition about outsourcing :

  1. Thomas L. Wheelen & J.David Hunger : “Outsourcing is a process in which resources are purchased from others through a contract instead of being made with the company.
  2. Mason A. Carpenter & Wm. Gerald Sanders (2007) : Outsourcing is activity performed for a company by people other than its full-time employees.”
  3. Eugene Garaventa & Thomas Tellefsen : “Outsourcing can be defined as the contracting out of functions, tasks or services by an organization for the purpose of reducing its process burden, acquiring a specialized technical expertise or achieving expense reduction.”
  4. Wikipedia : “Subcontracting a process, such as product design or manufacturing, to a third-party company.[1] The decision to outsource is often made in the interest of lowering firm costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of labor, capital, technology and resources. Outsourcing became part of the business lexicon during the 1980s.”

After reading the above definition, Now probably you are wondering why do companies outsource ?

According to my opinion, companies outsource because of the following reasons :

  1. Improve Business focus. Companies will have their resources focus on their core strategy and business
  2. Gain competitive advantage. It’s true that outsourcing provider will specialize and develop certain skill, so the companies who use their service automatically will gain a competitive advantage. I assume that companies choose the right outsourcing provider.
  3. Split operational and investment risk. If companies do all activities, they also have to manage the operational and investment risk. By outsourcing one or more of their business process, it automatically split or share the operational and investment risk.

Outsourcing is a domain of Business Process Re-engineering (BPR). So the outsourcing is started by researching companies business process. Companies will have to find out which process or activities that have to be done internally and which that can be outsourced.

According to Ron Hira & Anil Hira (2005), in 2010 three will be 1,700,00 jobs to be moved offshore. We can called it “The Outsourcing Mega trend”.

Outsource – A Positive or Negative Experience?

Outsourcing occurs when a company contracts with another company to get services that might otherwise be performed by at home employees. Many big companies are starting to outsource jobs now. These jobs include services with e-mail, call centers, and payroll. This work is performed by separate companies that specialize in a specific service, and are often located at overseas companies.

There are multiple reasons that companies outsource jobs to other people, but the biggest advantage is that it saves money for the company. Many of the places that give these outsourcing opportunities are able to do the work for a lot less money because they do not have to offer benefits to their workers. They additionally have a less amount of expenses to worry about.

Outsourcing provides the opportunity for companies to focus on other business problems while having the details taken care of by outside experts. This means that a great amount of awareness and resources, which management usually handles, can be used for more important, bigger issues within the company. This saves time and effort. The company that handles the jobs is often efficient, and usually has capabilities that are great and the ability to get new technology that a company could not afford by them. In addition, if a company is looking to expand to different places, outsourcing is a cost-effective way to start building more companies in other places around the world.

There are also some disadvantages to outsourcing as well. Not many when you compare it to the many benefits, but if you’re not careful when setting on your outsourcing journey, you can fall into one of the many pitfalls.

One of the disadvantages is that outsourcing usually gets rid of immediate communication between the clients and the company. This reason makes a company not be able to build a solid relationship with their clients. This, in turn, leads to the unhappiness for either the company or the clients. There is also a problem of not being able to control some aspects of the company.

This is because of the delay in project implementation and communication. Any company information is more vulnerable, and a company may become very dependent on the outsource. This means that problems could easily arise if the outsource provider back out on their contract all of a sudden. While outsourcing may be a good thing for many companies, it has many bad aspects, too.

Reasons Why Companies Outsource Services

Outsourcing has been greatly embraced by many companies to obtain services requiring experts at relatively lower prices. This helps a company to reduce the workload to its employees as well as transferring the risks associated with outsourced services to the hired contractor. You can easily find an outsource company by carrying out a simple online search which will reveal the vendors offering the services that you require and you can request quotes to know more about the outsource services and charges.

Companies outsource services for such reasons as:

• To accommodate peak loads to ensure that there’s always enough staff to handle any emergent rise in demand. This also ensures flexibility as you can easily hire or lay off some staff depending on the workload.

• Consultants or vendors can be used to bring in new ideas and train the internal staff

• Contractors can be used to handle some supplementary jobs while the internal staff is left to concentrate on some more important things

• Saving on cost as it is cheaper to outsource services sometimes rather than undertaking the process of recruiting, hiring and training your own staff

• Saving time since outsourcing services can be done in a very short period

• Increase efficiency as the companies hired normally have experts and usually use the latest technology.

What can I outsource?

Many people or companies may end up asking the above question but there are many outsource services available, from those that require experts or consultants to those complimentary services that require contractors. Some of these are payroll services, e-mail services and call center services among others.

Outsource services also form a very cost effective way of introducing new technology to your company. This is accomplished by hiring consultants who have knowledge and experience in using the technology to work for your company.

Tips on choosing an outsource company

Compare quotes – for many outsource services, there will be a number of companies who can offer them and you can easily find them online. Thoroughly compare them to finally decide on the one that offers you high quality services at a good price.

Registered company – ensure that the company you choose is registered to offer the said services to be sure that it can deliver as expected. The company should also have a good reputation and you can find this out from their customer testimonials – comments by people who have previously used the services of this company.

In conclusion, availability of outsource services has ensured efficiency and overall productivity of many companies as the hired contractors or consultants offer quality services while significantly reducing the operation cost. Outsourcing has many benefits which one can use to better his or her company.