How To Outsource

Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). Most recently, it has come to mean the elimination of native staff to staff overseas, where salaries are markedly lower. This is despite the fact that the majority of outsourcing that occurs today still occurs within country boundaries, especially in North America . It became a popular buzzword in business and management in the 1990s.

In long-term relationships, the key component for success of the relationship is best laid during negotiations, which lead up to the signing of the Service Level Agreement. Some of the common practices employed for a successful management of outsourcing relationship have been listed below.

1. Relationship between key management personnel:

If there is a good understanding and strong working relationship between the key management personnel of both teams, then such relationships often tends to last long. Research on outsourcing success has indicated that peer friendships and working chemistry with one's counterpart in the other company has been an important factor in long term relationships.

2. Measurable Objectives:

The objectives to be achieved by outsourcing must quantifiable and must be established as criteria right at the start of the contract. If the customer can compare the performance with the pre-established objective, then the benefits of outsourcing would be clear. The vendor would know where they stand in meeting customer expectations.

Well-defined performance criteria have quantifiable objectives, service quantities, quality, customer satisfaction and are measurable against other providers.

3. Forming special committees:

Successful outsourcing relationships involve setting up of special executive committees or boards that draw out the best strategies for smooth & effective handling of outsourcing relationship. Identification, resolution and rapid escalation of issues are a key responsibility of this team.

4. Incentives and Penalties:

The provider is encouraged to meet or exceed customer expectations by establishing performance based pricing. When performance exceeds the criteria, the incentives apply and when they fall short, the penalties are imposed.

5. Periodical review meetings:

For a successful software outsourcing relationship, it is better to have frequent formal review meetings. These meetings can discuss what both teams are working towards and a high level view of the future goals and objectives. Product reviews and deliverables can be discussed at such meetings.

6. Training vendor personnel:

The vendor personnel need to have ongoing training so that they align their business goals to the business objectives of the customer. The issues driving the clients needs have to be understood and the vendors' service has to relate to them.

7. Bridging cultural differences:

Both parties to the outsourcing relationship will have their own culture. These differences have to be recognized and bridged. Organizing social events, education on company background, participation in others' quality programs, etc are some of the ways to bridge this gap.

Types of Outsourcing

Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). In long-term relationships, the key component for success of the relationship is best laid during negotiations, which lead up to the signing of the Service Level Agreement. Some of the common practices employed for a successful management of outsourcing relationship have been listed below.

1. In-House Building (No outsourcing)
   Many organizations have their own Information Technology departments catering to their needs of software. These organizations develop the required software and information systems within their own capacity and limits.
   
2. Product Component outsourcing
   In Product Component outsourcing, the developer is contracted to develop a part of an overall system. In case of large and complex systems where the organization does not have the capacity or required skill to develop a particular thing is outsourced.
   
3. Process Component outsourcing
   In Process Component outsourcing the customer organization simply contracts for an external group to perform all or part of the functions of one or more of their process steps or components.
   
4. Software Acquisition (Total outsourcing)
   In this type, the organization outsource each and every activity associated with the software which includes design, development, programming, testing and maintenance .The main reason for such type of outsourcing is to focus on the organizations core values.

Offshore Outsourcing

Offshore Outsourcing development work offers significant savings, but companies need reliable offshore partners to realize those savings. Our offshore outsourcing services company has built a reputation for doing solid, disciplined work that is delivered on time, and on cost. Our offshore outsourcing company help firms capture the full cost savings promised by offshore outsourcing, and delivers enterprise-class results.

Offshore Outsourcing is a business activity through which business firms attempt to reduce or eliminate its non-core areas of functioning. In simple words, offshore outsourcing is based on the principal that no organization can perform all of its activities optimally and with same efficiency as others. Every business firm irrespective of its size has to undertake various business activities or processes in order to achieve its targeted objectives. Each business activity consumes certain resources of business. A business process that consumes more resources will reduce the overall profitability. A firm will detect such high consumption activities by comparing their output with its resources consumed. In order to reduce the resource consumption, business organization stops performing the activity that does not produce satisfactory output when compared to its resource consumption. The organization instead contracts with another entity that is better at performing that particular activity and would carry forward the same on behalf of the business organization

This arrangement would lead to lesser resource consumption and increase the competitiveness of the business organization. This arrangement is nothing but ‘Offshore Outsourcing'.

Offshore outsourcing literally means outsourcing your activity to one who is not on your shore or who is beyond your shore. Offshore outsourcing is a concept in which the buyer of the service is located in some other country then the provider of the service.

Organizations are tempted to invest in offshore outsourcing resources because when compared to their own countries, certain nations have vast & easily accessible resources that can be exploited to gain competitive advantage.

Many developing countries are attracting business organization from developed countries because developing countries are providing quality services at economically cheap price in comparison to developed countries. Various issues affect the decision of a client regarding offshore outsourcing. Factors like manpower cost, manpower quality, and infrastructure facilities in a nation decide the attractiveness of that country as a offshore outsourcing resource location. Legal and business environment in the service provider's country plays a major role in the development of offshore outsourcing.

Offshore outsourcing has revolutionized industry segments. Information technology being in the lead, offshore outsourcing is also helping many industries in manufacturing segments to gain competitiveness. Outsourcing offshore development.

The word Outsourcing itself has a whole series of definitions:

"acquiring a product or service rather than producing it yours"

"the contracting out of a company's non core, nonrevenue-producing activities to specialists"

"transfer or delegation to an external service provider the operation and day-to-day management of a business process".

OUTSOURCING DEFINED

• Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). Most recently, it has come to mean the elimination of native staff to staff overseas, where salaries are markedly lower. This is despite the fact that the majority of outsourcing that occurs today still occurs within country boundaries, especially in North America . It became a popular buzzword in business and management in the 1990s.
• Where functions previously performed by an organization are supplied under contract from a third party.
• Buying goods or services instead of producing or providing them in-house.
• The concept of taking internal company functions and paying an outside firm to handle them. Outsourcing is done to save money, improve quality, or free company resources for other activities. Outsourcing was first done in the data-processing industry and has spread to areas, including telemessaging and call centers. Outsourcing is the wave of the future.
• A long-term, results-oriented relationship with an external service provider for activities traditionally performed within the company. Outsourcing usually applies to a complete business process. It implies a degree of managerial control and risk on the part of the provider.
• The transfer of components or large segments of an organization's internal IT infrastructure, staff, processes or applications to an external resource such as an Application Service Provider.

Outsourcing development work to pakistan offers significant savings, but companies need reliable offshore partners to realize those savings. Our Outsourcing services company has built a reputation for doing solid, disciplined work that is delivered on time, and on cost.

As part of the outsourcing, many companies are debating when to outsource their management support tools as well. This is a complex question that must consider the competitive advantage which a tool may provide. The company must also account for how ready the market is to support such a tool in an outsourcing model. The final direction should not solely be question of cost savings, but must consider the benefits and the strategic position of the company in the marketplace.

Outsourcing Benifits

Outsourcing development work offers significant savings, but companies need reliable offshore partners to realize those savings. When you consider the advantages of outsourcing, you'll realize there's a lot to gain by using it as an intrinsic part of your business strategy.

The benefits of outsourcing to Pakistan of course are variable, dependent upon the nature and situation of the organization. However, the following is a list of common reasons why outsourcing is undertaken:

• Lower costs due to economies of scale
• Ability to concentrate on core functions
• Greater flexility and ability to define the requisite service more readily
• Specific supplier benefits. For example, better security, continuity, etc.
• Higher quality service due to focus of the supplier
• Improved internal management disciplines resulting from the exercise itself
• Less dependency upon internal resources
• Control of budget
• Faster setup of the function or service
• Lower ongoing investment required in internal infrastructure
• Greater ability to control delivery dates (eg: via penalty clauses)
• Lack of internal expertise
• Increase flexibility to meet changing business conditions
• Purchase of industry best practise
• Improve risk management
• Acquire innovative ideas
• Increase commitment and energy in non core areas
• Improve credibility and image by associating with superior providers
• Generate cash by transferring assets to the provider
• Gain market access and business opportunities through the supplier's network
• Turn fixed costs into variable costs

As part of the outsourcing, many companies are debating when to outsource their management support tools as well. This is a complex question that must consider the competitive advantage which a tool may provide. The company must also account for how ready the market is to support such a tool in an outsourcing model. The final direction should not solely be question of cost savings, but must consider the benefits and the strategic position of the company in the marketplace.