Cost Pocket-Packet Cutting - Outsourcing 2016

Updated on :June 15, 2024

Outsourcing today is synonymous to “Fashionista”. Every industry, company, entrepreneur, government, institution...... is looking forward to adopting and adoring Outsourcing. Why? It cuts costs, saves time, relieves stressful burdens, offers relaxation with shared responsibilities, allows you to concentrate more on core issues, and attracts the best professional talent and skill besides wider avenues.

Outsourcing has saved many ships from sinking from financial debts and manpower debacles (employee strikes, Unions, etc.), liquidity, closures, etc. Hence the connotation of Fashionista perfectly fits the issue. It has lifted and made sick units into attractive, seductive revenue-generating ventures. In fact, outsourcing is just a recent label to an activity that was already practiced by milk vendors, newspaper vendors, ice cream vendors, etc.

I remember way back in 2001, one of my family friends was already involved in outsourcing. She was involved in making Asian savories (samosas) and was outsourcing the preparation of it to Malaysia. Voluminous demand spurring across the entire London was becoming unmanageable. Plus expensive proposal to hire/buy a big space in a crowded city like London, hiring manpower, managing running the workshop was giving her real jitters.

A neighbor who was from Malaysia suggested outsourcing the entire process in Malaysia as they were involved in IT companies outsourcing their operations from London. Voila! She is almost like a known millionaire in the UK, having her shops in Dubai, Norway, Switzerland, Scotland, and Manchester in a span of just three years. Today she proudly says that she was the one who initiated outsourcing in Columbia Road in East of London.

This post will highlight some trends prevailing in outsourcing. Today almost the entire commercial and professional world is revolved, revamped, recognized, and restructured in terms of revenue growth and productivity increase, thanks to OS. The Corporate and the Industrial world have become closer than ever, almost like a merged fraternity due to OS.

It has given opportunities to a lot of entrepreneurs, companies, manufacturing units, the service industry, health and hospitality industry to function not only independently but extremely efficiently and effectively. This is by venturing into partnerships with suppliers/contractors/vendors, agencies, etc. Companies benefit a lot by outsourcing transportation Services, employee retention, communications marketing services, health care, mortgage Solutions, etcCompanies today, therefore, have adopted outsourcing in two interesting ways:

Adopting outsourcing single component of daily operations

Adopt outsourcing as a strategic part of their regular business./strong.

In the case of (b), some companies prefer designing products in-house and appoint outsourced contractors to operate the supply and manufacturing aspects of their products. Let us consider here the Oil and Gas sector industry. Oil companies outsource marketing of petrol, diesel, lubricants, aviation fuel, etc., through their dealer network (these are known as retail units or petrol pumps) and successfully combat the voluminous needs of the masses very effectively and efficiently with a smooth cost-cutting strategy. A lot of activities are outsourced or offshored. 

Offshoring:

Involves allotting or contracting overseas either part or whole function of the work process. However, the completion of in-house projects concerns (or demands) outsourcing. It is, therefore very, essential to know how to fit outsourcing into your business strategies or business plan. Most IT companies globally are incorporating infrastructure in the form of service for outsourcing contracts.

ITO-Information and technology:

Outsourcing and BPO -business process outsourcing are two different types of cloud engagements as also two levels of disruption. ITO involves and is driven by the following:

  • Service engagements
  • Infrastructure
  • Providers for computing processing capacity
  • Storage or middleware
  • BPO is driven by software as a service offering with major intense disruptions.

Why Outsourcing?

It is observed that more and more budding enterprises, especially major hospitals, Corporate find it very convenient to outsource their HR, CRM, marketing (e-marketing, brand awareness), and functional activities to SaaS and other similar agencies. This encourages and creates very lucrative new relationships outside the domain of the IT department. (Makes it easier to access Oracle Fusion, Workday, or Salesforce) which means these functions have replaced providers and applications in the form of the public cloud, which consequently makes most disruptions happen. Outsourcing allows for streamlining business operations, strategically it allows utilization of resources, expands time zone, and allows diverting toward key growth functionaries.

When to outsource?

The cost/ time calculation of a task to be performed is a perfect barometer for deciding to outsource. Say, for e.g. you are running a printing press (a big one), there is a certain amount of content writing or proofreading that can be managed in-house with budgeted time and money. But, there will be a huge vacuum of coping with in-house developers and software designers to meet deadlines in terms of increasing software design flexibility, completion, and timely deliverance.

This can prove very beneficial if the task is outsourced to a contractor with a view to having a long-term aspiration of recruiting in-house developers. While conducting a cost/time study, it is important to establish goals and a timeline with the outsourcing party (contractors). In the case of outsourcing outside the continent or state, clear communication is very important, especially concerning developmental work.

Despite faster and more effective tools of communication, viz. emails, phone calls, fax, Skype, and video conferencing, in outsourcing getting the point across are effective measures in managing a project outsourced. Being well informed and aware of different cultures and languages is of very prime importance in outsourcing.

What to outsource:

It is very relevant to the industry you are involved in. Two types of tasks opted for outsourcing. The ones very crucial to the operations aspect rather than those relating to strategy. (E.g.delivery assistance in retail stores/malls both inbound and outbound).

Secondly, it is commodity tasks that get outsourced e.g. running a printing company where services are of utmost importance. Outsourcing all aspects of procuring stationery, nitty-gritty office investments, managing office equipment & staff, various facilities, etc., has a major cost crackdown when outsourced.

Outsourcing trends in 2016:

focused more on leveraging, negotiating, and rebidding deals and, importantly, having the best-of-breed offshore outsourcing approach.

The IT outsourcing industry (with various shifts) is focused on the following:

  • Hyper-speed deal-making
  • Plenty of man-machine collaboration
  • Multi-sourcing headaches

For Companies:

  • Cloud computing options of all flavors
  • Embracing Increased standardization
  • Leverage used to renegotiate
  • Rebid deals
  • Adopting the best-of-breed approach to offshore outsourcing
  • Bring more focus on hyperspeed deal-making
  • New multi-sourcing headaches and potential cures as the emergence
  • Making man-machine collaboration increased
  • Have the service provider universe significantly expanded
  • Security is taking center stage, from the boardroom to the break room, influencing outsourcing strategy.
  • Security risk is increasing in telematics and the Internet of Things (IoT), especially in consumer and commercial products.
  • Increased number of threat actors that uses more creative ways to exploit weaknesses with devastating effect.
  • Regulators increasing fines for poor security.
  • The weakest link prevalent in a company’s security with service providers will need to look for better ways to address the concern.
  • Since the threat profile is subject to constant change (practically every day) with every added protection, more vulnerability is experienced. Which obviously makes it tough to tie products together and deliver a robust security solution. The need, therefore, for more security companies with skilled and specialized security vendors having the specialty in security-as-a-service capabilities is needed, protecting data on, as and where basis.

Conclusion: 

The decision of the organization to outsource part of its business activities is not an easy feat. Selecting or picking outsourcing companies/services based on cost-saving features, some tactical problems, or a short-term cost savings solution is definitely a welcome gesture.

It definitely affects the potential growth of the company on a long term basis. It is essential for the organization to possess mature, good management skills with adaptability to new behavior/processes. As it is then easy to manage/handle new external extended parts of business effectively. In addition to all this, having tacit knowledge is a real icing on the cake.

Tacit knowledge becomes very handy when an already existing internal component of the business is to be outsourced. As it is directly related to risking losing valuable institutional data, which can be a grave concern. Transfer of any tacit knowledge can overall have a grave effect on the quality and strategic business. Language barriers and cultural nuances are also challenging to the otherwise difficult process of transferable tacit knowledge. Especially in cases of cross-border outsourcing.

Finally, the implementation of specific knowledge management strategies once the decision to outsource is made will certainly go in a long way to avail maximum benefits from a decentralized business model.

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