Blog Archive for September 2012
The benefits of outsourcing
are well-known. Businesses can save money, access higher level of skills, and increase productivity. However, like all business decisions, outsourcing must be carefully analysed.
According to an article at CIO Today
, here are the important steps to take to find out if outsourcing fits your business:Determine if outsourcing will provide the financial goals that you are vying for.
Perform an initial cost/benefit analysis. This will identify areas that can potentially benefit from the deal, and the costs that may arise to support it. Ask for feedback from other businesses or colleagues in your industry.
Find out what they experienced from outsourcing, particularly the benefits and pitfalls. Executing, maintaining, and even terminating an outsourcing deal triggers significant changes that impact your business. Interview potential service providers
. Find out if they offer the services you are searching for. Check references. Take a closer look at their experience in the industry. Apart from delivering the services you want, they should also have an understanding of your culture. How to Plan for Outsourcing
Outsourcing can be a cost-efficient solution for any business. However, like any other business transaction, outsourcing
demands careful planning for it to work.
Here are the important factors that businesses should remember when planning to outsource: Be clear and concise.
Clients should prepare a proposal that has all the necessary information. This includes organisational goals, services they require, timetable, and service level requirements. It should also contain the current status of the business, from staff to budgetary constraints. Negotiate a contract that fits your business.
Your service level agreement should specifically indicate what you and your service provider
are responsible for, and the timeframe for delivery. Consistent communication.
To get satisfying results, clients should always communicate with their service provider. Be clear on your expectations, discuss key issues, appoint a project manager, and provide regular updates. An outsourcing arrangement will not automatically work smoothly over an extended period of time. It should be driven and maintained by the client and the service provider
Outsourcing deals are advantageous for any business that aims to reduce costs. Unfortunately, not all business transactions go according to plan. At this stage, some might walk out to avoid further problems. However, terminating an outsourcing contract is not always the best choice. It may even lead to a more complicated situation.
According to an article by Forbes
, here are important factors that you should consider before ending an outsourcing deal. Find out the real issues.
Clients should analyse the root cause of the problem. Service providers are not always at fault. A successful outsourcing relationship is a two-way street. Lack of communication, clear priorities, support, and oversight from clients can lead to subpar results.
If the issues are a result of poor performance from service providers, clients should analyse the possible consequences of terminating the contract. They should give their service provider a chance to fix the issues first. Plan.
Terminating a contract will trigger a series of events. A migration plan should be made to address changes that will occur. The plan will depend on the next step that the clients will take.
If they choose to outsource again, clients have to pick the right service provider
to avoid the same problem. If they move the outsourced processes in-house, they need to allocate resources. Both situations require timing and coordination. Evaluate the risks involved.
Clients need to take a closer look at business options in the future. If they terminate the contract, the business will face operational, management, and technical challenges. Clients may have to pay termination fees, allocate internal resources, and ramp-up/ramp-down. Read the fine print.
If the issue is beyond repair, clients should review the signed agreement with the service provider
. In most cases, a client's general dissatisfaction doesn't qualify as a breach of contract. Unless the service provider
violated the terms and conditions, they may have to pay a substantial amount to terminate the agreement.
Whatever the reason may be, clients need to make a planned and calculated step before terminating an outsourcing contract. An informed decision will lead to a smoother migration.
Clients often complain that they don't receive enough innovation from their offshore service providers. At the recent Sourcing Industry Conference, organisers asked a group of service providers why this is so.
Service providers defined innovation as a two-way street. Clients don't understand that it's a collaborative process. They don't provide an active role and the specifics to create the innovation they demand.
According to an article at ISG-one.com
, here are five ideas from service providers that clients can use to be able to formulate what kind of innovation they need.Define innovation.
Each person has his or her own definition of innovation. Clients and service providers should talk about what innovation means to each of them. This way, clients can voice out what it means to their business, and service providers can find out if these expectations are viable or not. Innovate all business processes.
Clients should innovate all areas of their business, including back office functions
. In most cases, businesses mainly focus their strategic planning and innovation on production. Integrating these processes with all business operations will enable the service provider to deliver innovation that impacts the whole company. Invest.
Reducing overhead costs has always been one of the top priorities of companies. While this may save money, it may cost the client the innovation they are vying for. For any company to grow, investment in emerging technologies and services is essential. Differentiate innovation from continuous improvement.
Business executives have different expectations with operations executives when it comes to innovation. As a result, service providers may find it difficult to provide a solution that meets both demands. Clients should recognize forms of continuous improvement from the big “I” - innovation. Take control.
Most companies nowadays have different service providers. This multi-player kind of situation is beneficial for the business. However, without any leadership, things can easily get complicated. In this case, clients should drive the group for a seamless team effort.
Before, small business owners are limited to outsourcing
two roles - bookkeeping and house cleaning. Today, through quality global service providers, every element of a business can be outsourced. According to an article in Think Tank
, outsourcing is important for every small business to grow. Why Outsourcing is Essential to Small Business Owners
Small business owners can benefit from outsourcing
in three ways: Pay as needed
Business owners have the option to only pay for services that they need. They don't have to spend days stressing over a logo design or searching for a low-cost programmer to build their website. They can outsource these tasks instead. There are outsourcing companies that provide low-cost creative and IT services
for a specific project. Subject matter expertise
Business owners can access expertise that is not available to them domestically. They can reduce overhead costs by strategically outsourcing
processes that may be expensive when done purely in-house. Moreover, businesses get the chance to have a fresh perspective from an industry expert. Free up resources
Small business owners tend to do everything by themselves, which is a cumbersome and time-consuming endeavour. By offloading other tasks, such as outsourcing HR and Recruitment, small companies can concentrate on their core functions. How to get Outsourcing Right
These are important pointers that every small business owner should keep in mind: Select an outsourcing company by recommendation or reputation
. There are a lot of outsourcing companies out there. Owners should pick the best one that fits their business. Keep it flexible
. Small business owners should avoid signing long contracts. This way, they can make changes when needed. They should also regularly check the agreement to make sure that their offshore service provider
continuously delivers. Use non-disclosure agreements
. Small business owners should be very cautious about any agreement that enables their service provider
to be in contact with their customers. If they make a mistake, it may reflect badly on the business. They should get their offshore service provider to sign a non-disclosure agreement. Keep an eye on costs
. Hiring an offshore service provider
does reduce overhead costs. However, this doesn't mean that small business owners shouldn't keep track of their expenses. With plenty of hard work and a bit of luck, they will be big enough to hire local staff.
In an article posted at theoutsourceblog.com
, the budget for outsourcing IT services increased by 23% according to a IT Outsourcing Statistics
report by Computer Economics. The report also indicated the most outsourced IT services, including IT functions that have the highest potential in the outsourcing sector. Dominant outsourced IT Services
Web/e-commerce systems and application development were the most widely outsourced IT functions. According to the report, outsourcing in this sector is highly likely to grow "relatively slow" compared to other IT services.
In addition to that, the report lists key IT services
that businesses can benefit from through outsourcing. Help desk support has the greatest potential to reduce costs while IT security is most likely to improve IT functions. IT Outsourcing Analysis
IT spending for outsourcing increased as businesses stabilised after the recession. The total IT budget for outsourcing services climbed from 7% to 8.6%.
Computer Economics looked at how many businesses are outsourcing and how much of the work is being outsourced. The report found out that IT organisations are starting to adopt the cloud technology and are expanding operations. These, as well as cost reduction, are factors that push businesses to consider IT outsourcing.
Increased adoption of cloud-based applications and software as a service (SaaS) had a positive influence on IT outsourcing
budgets. Businesses which outsourced application hosting are nearly 37% year-over-year. Moreover, more than half of these businesses are planning to increase the amount of work they will outsource for this function.
According to the Business Processing Association of the Philippines or BPAP
, the global IT-BPO industry is facing new opportunities and challenges brought about by technological developments, increase in demand, as well as changes in public policy. This trend, along with the role of the Philippines in the continuing growth of the BPO industry, will be examined in the International Outsourcing Summit 2012
which will be held on October 7-9 in Makati. Golden Age of Outsourcing
According to the data provided by India's National Association of Software Services Companies (NASSCOM) and BPAP, the Philippines earned $11 billion in 2011. This is 13% of the global industry revenue of $87.32 billion. The Philippine IT-BPO industry is estimated to grow by another 20%, exceeding $13 billion in revenue and accounting for a slightly higher share in the global market.
Revenue from voice-based services in the Philippines continues to grow by 20%, but it's outpaced by non-voice services. It accounted for nearly 33% of the total IT-BPO revenue in 2011. Health information management grew by 170% and IT (including software services) by almost 40%.
With these impressive numbers, BPAP asks, "Have we entered the golden age of outsourcing?" and "How is, and will, the industry respond?" These will be discussed by the delegates in this year's International Outsourcing Summit. International Outsourcing Summit 2012
The visibility of the Summit has continued to grow as the influence of the Philippines within the BPO
industry expanded. The country has proven to be one of the most popular global providers of business services for outsourcing. Industry revenues have grown from $7.1 billion in 2009 to $11 billion in 2011, expanding by almost 40% in over three years since the Summit was organised. Direct employment has jumped from 423,000 to 638,000, a 44% increase.
Raymond Lacdao, along with over 500 top-level executives and key government officials from the IT-BPO and GIC industry, will participate in the Summit. Industry executives include top service providers and GICs (global in-house centres) in the world, representing financial, energy, insurance, legal and engineering firms. A diverse group of clients are also expected to join, from restaurant operators to telecommunications firms (Telstra).
The Summit is an international gathering, as well as a platform for demonstrating the Philippines' capabilities in the IT-BPO industry.
In an article posted at BPOOutcomes.com
, research firm Everest Group recently reviewed current economic conditions that have an impact on the global services market. In the global business advisor's webinar, "Key Market Developments in Q2 2012: Market Vista Briefing", reports show that GICs (global in-house centres) experienced steady growth. While traditional outsourcing
deals declined, new transactions in non-traditional locations increased.GIC Growth Driven by Technology and Manufacturing Sectors
In Q2 of 2011, GIC setups and expansions dropped to nearly 50%. This year, GICs stepped up a notch in Q2 of 2012, rising from 18-19. Everest Group reports that 75% of the slight increase came from technology and manufacturing clients. In Q1 2012, 19 of 37 GIC deals came from the technology sector, while 9 came from manufacturing. According to Everest Group's analysis, this activity is centred in Asia and India.Outsourcing Declines, Taps into Non-traditional Markets
In Q2 2012, there is a total of 508 outsourcing transactions. While this is an unusual increase (so far there had been fewer than 500 transactions per quarter), it indicates a 20% decline from 516 in Q2 of 2011. Outsourcing transactions fell to 411 of Q2 2012. Everest Group reports that traditional outsourcing activity in BFSI (banking, financing services, and insurance), manufacturing, and energy sectors have declined.
Energy outsourcing deals provided a big portion at 30%, from 175 in Q1 2011 to 125 in Q2 2012 from other categories in the industry (travel and logistics, telecommunications, and technology). BFSI outsourcing deals dropped by 25%, from 98 to 73. Manufacturing outsourcing deals showed a modest 10% decline from 76 to 68. These volumes continue to drop in major markets such as North America and Western Europe.
However, outsourcing contracts in other geographies including Brazil, Australia, and India increased. Deals jumped by 36%, from 66 in Q1 2012 to 90 in Q2 2012.Everest Group Urges Local Optimisation
A special portion of the webinar was dedicated to a new topic for large organisations. Everest Group recommended that businesses should focus on optimising existing delivery centres instead of finding new locations. The global business advisor urges businesses to use synergy across sites, leverage manpower, and mitigate operational risks. In addition to that, they should expand these services at an existing centre or open new ones within same cities.