Outsourcing for Profit
What is outsourcing?
Outsourcing is a process of subcontracting your organizational function to a third part who are specialized at the particular domain. There has been lot of discussions about off show out sourcing business processes. In the 20th century process of outsourcing got so influence to the IT sectors comparatively. Therefore Outsourcing is a fundamental business process and it is leading to specialization.
Why outsourcing?
This is the time you have to properly evaluate the needs of Outsourcing to your enterprise. Because there will plenty of work you may have which you may not capable of doing on your own.
You do not have the skills or experience to do a specific task, and you do not want your existing client to talk to a competitor.
You do not have an optimized process framework to do a particular task or project. The same can be done by an outsourcing partner more efficiently and effectively.
You want to optimize your profits by reducing your costs.
You want to bring agility to your dynamic business by converting fixed costs into variable costs.
You want your team to focus on your core strengths and future strategy, while outsource tasks which are no longer key differentiators in your industry.
You want to diversify as your business evolves, but also keep your existing business and revenue stream intact.
What factors to consider before you outsource.
Most importantly identify the needs of outsourcing
• What is your business strategy?
• What sets you apart from your competitors?
• What are your business processes?
• What is your core process?
• What resources do you have in house?
• What are the costs of doing these processes in house?
• Which processes can be outsourced?
• Where can the process are done the best and the cheapest?
• Who will manage the outsourcing relationship from your end?
• What are your expectations from your outsourcing partner?
• How will you measure and communicate results with your outsourcing partner?
The three levels of outsourcing
You can outsource your business processes in three different ways.
1.Outsourcing a task
When it is essential to have direct control of the project, you may outsource some or all the tasks, while managing the project in-house. Here you may be looking to reduce the cost or bring in special capabilities to effectively and efficiently execute the project.
Example:
• Design to XHTML conversion
• Blogging, Article writing
• Link building
• Testing a website
• Resolving support tickets
• Telemarketing
2.Outsourcing a project
When you have a well defined project scope and an agreed upon process and deliverables, you may outsource the end-to-end project delivery. Here, your outsourcing partner provides the project management services where you bring in consulting and customer relationship management capabilities.
Example:
• Web site design
• Ecommerce site development
• Web application development
• Search Engine Optimization (SEO)
3.Outsourcing a process
You can also outsource an entire process, i.e. a set of related tasks from every project. This enables a company to let go off an entire non-strategic activity. It is important to decide the task, project or process you wish to outsource based on the above mentioned pointers.
Activities you can outsource.
You can outsource almost every process in a given business. And I listed some of the often outsourced projects.
Finding your outsourcing partner.
Finding the right outsourcing partner is critical to your success. You can choose to work with outsourcing agencies as well as individual freelancers.
How to choose an individual freelancer?
Individual freelancers can be a great option to get smaller tasks or one-off projects done quickly without investing in building a relationship.
How to choose an agency?
An agency can be a great option for outsourcing on-going projects and processes. However, it needs a more detailed selection process.
Collect business details on the following
• How long they have been in the business?
• What are their core strengths?
• What are their success stories?
• Pricing and cost models
• Staff selection process and retention rates
• Delivery models
• Service level agreements
• Quality assurance processes
• Infrastructure and systems
• Communication models (chat, email, and phone)
• Financial performance in last three years
• Credit reports from a reputed agency
• Find out how satisfied their customers are
Best Practices in outsourcing.
Before you start your first project
When you start a new outsourcing relationship, there are too many things happening simultaneously:
• You are learning about outsourcing
• You are building a working relationship with a new service provider
• You are getting a project done
Plan and divide your project in phases.
It is best to commit in a phased manner. This makes the project more manageable and enables you to have a tighter control
Negotiate the ownership of work
If your vendor is going to use any proprietary module to complete your project quickly, you may not have full rights to the source code. You may end up paying higher for complete and exclusive ownership.
Managing projects
Ensure that the requirements are clearly understood
Send all work requests in writing
Schedule an initial call and regular check-ins, if necessary
Be prepared to review all work before turning it over to the client
Building Relationships
Two-way feedback at the end of every project
Communicate your plans regularly
• any expansion or downsizing plan
• any technology that you plan to adopt
• any quality process framework you are considering
• any expected increase / decrease in work volume
Managing Risks
Pay only against completed work
Have a clear project plan with well defined milestones. Keep the below pointers in mind while managing payments in outsourcing relationship:
Protect your intellectual property
• Physical security of the facility (access control system, etc.)
• Data protection policy and methodology, including security of server / data storage and network
• Employment agreement of your outsourcing partner with employees
Have a risk mitigation plan!
It is always good to have a risk management plan. It is advisable to plan for situations like:
• your outsourcing partner going out of business
• service delivery not being as per expectation
• change in management • unexpected attrition
