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The future shape of business is being redefined through outsourcing

What is Outsourcing
Outsourcing means finding better ways of doing business. It helps companies to look to the value chain for high leverage areas and helps them to better utilise their resources to exploit these areas. Outsourcing is a means to achieve competitive advantage by focusing on core competencies.

What to Outsource

CRM (Customer Relationship Management) SCM (Supply Chain Management) Back Office
Payroll Billing Accounting Investor Relationship Management Share Transfer & Fixed Deposit Accounting

Why Outsource
Use the specialised services and skills of the Outsourcing partner Better utilise internal resources Increased responsiveness to customer needs Decrease financial risks by reducing capital investments

In-house Vs. Outsourcing Key Questions


Speed and cost for transformation how long will it take to transform the function or process internally vs. externally? Management attention should management devote a significant amount of time and energy to this process? Talent are we putting our best people, with the appropriate skill sets, into these processes?

In-house Vs. Outsourcing Key Questions


Capital does the function win (or lose) the war for capital within the corporation? Track record does the function have a track record for meeting or beating its commitments? Accountability if the transformation is NOT successful, who will be held accountable?

Often a company will look to a contract manufacturer to improve efficiency or reduce labor costs. In Most cases the objective of outsourcing is a targeted 20% cost reduction, with actual savings coming from direct labor and variable cost. while a seemingly low bid may look attractive, incomplete or misunderstood specifications can result in an overhead nightmare.

Outsourcing Opportunity or Burden

International outsourcing has become the easy way out for many organizations seeking to stay competitive in a global economy, whereas establishing a lean Six Sigma organization requires sustained and consistent hard work. Proponents say outsourcing is the only way costs can be cut enough to keep the organization competitive. Ultimately, the decision to outsource jobs should be based on both economic and value criteria. Unless managers face the obligation to ensure that both the organization and its suppliers are producing at the highest quality levels and the lowest lean cost, the job is not being done. Only this cost base can determine the decision to outsource. It is the quality professional's responsibility to challenge the value of all activities throughout the organization that do not contribute to a lean quality culture. The first objective should be insourcing excellence. Outsourcing should be the last resort.

Motivators for Outsourcing


The followings are the major reasons given for taking outsourcing decisions

Difficulty of hiring skilled professionals (28.8 percent), Lack of in-house skills to deliver the desired levels of quality (20.3 percent), Budgetary considerations (13.6 percent), Mandate from the management (11.9 percent).

Risks in Outsourcing
Information Security Loss of control Compromising confidentiality Monitoring costs

Minimising Risks

Choose a service provider that has a proven track record - talk to customers of the service provider Know your requirements, both current and future, and put them in the contract Stay away from variable costs in the contract like communication, travel etc. Treat the outsourced relationship as a partnership and the employees and extended team members

Minimizing Risks

Choose a service provider who provides you with value adds, services or products that may not be in the contract. Develop a strong partnership with the vendor Secure a confidentiality agreement Simplify the interface between the two organisations Focus communications

The Key Layers in Outsourcing


Strategy Process Design Operations Systems

The Key Layers in Outsourcing


Retain in-house

Strategy - governance, policy setting, decision-making and direction Process Design - design, and consultative activities The Strategy and Process Design layers are typically retained with the management to ensure overall control of the activity

The Key Layers in Outsourcing


Outsource

Operations - administration, clerical activities

and day-to-day execution System - technology, infrastructure and transactional processing It is these two bottom layers combined - Systems and Administration layers that are most appropriate for Business Process Outsourcing (BPO)

Benefits
Service

Industry knowledge and expertise of the vendor Quick response time Function Difficult to Manage or Out of Control They are great in a pinch ability to increase resources whenever required

Benefits
Costs

Pay only for what you need The infrastructure is of the vendor Economies of scale with the vendor Reduce or Control Operating Costs Outsourcing is a cost-effective way to increase your resources.