With the never ending technological innovation we experience today especially in the field of business software programming, gone were the days when custom software development means using pre – programmed templates for the basic framework of the software application. With the introduction of outsourcing in IT for customized software and business applications, this has become increasingly popular to meet the needs of business owners who are looking for customized solution to improve their business processes. Most key players in IT outsourcing industry started developing customized software to meet the increasing demands of privately owned companies. This is because using custom application is the most efficient solution seen by industrial companies to make their operation well-organized, privatized, and more competent amidst the growing need for a more user friendly business environment.

But not all companies can set up their own in-house software development team because of various factors such as the expensive cost of setting up new resources, training, upgrading equipment, and other related factors. Most companies banking their success on operational discretion often have their software development outsourced to IT providers who are well equipped for this field. They then integrate it in their operational framework to improve work processing within the company. Outsourcing IT requirements like software development provides companies with the opportunity of improving their business operation without necessarily increasing their operational cost.

There are a lot of reasons why companies would prefer outsourcing their software requirements for custom solutions rather than buying off shelf software. For starters, the main concept for choosing customized software against generic application is privacy. Being private means there’s no need to license the program no matter how many users the program will be distributed to. Apart from that, only the outsourcing company and the people involved in it have the knowledge with regards to how the software works and its importance to the operational capacity of the company.

When it comes to outsourcing in IT for customized software development, the good thing about this is that it takes less time to configure as compared to in-house software development. Since it will be largely based on the basic framework of the company’s operational services, developing it is a lot easier. There’s no need for the software developer to be concerned about other issues not related to the company’s requirements as long as the specific software requirements have been provided by the client. During the development stage, there is a higher probability that both the company and the IT provider will be able to reach a more effective by – product. This is because they can be able to work out a smooth working relationship all throughout the project duration. Complicated processes including software testing and application, maintenance, and training are also easily implemented as compared to using packaged and generic software for business operational requirements.

The need for customized software integration in the framework of company’s operational procedures allowed most businesses to provide efficient and convenient functionality in addressing the growing demands of the industry. This is one of the reasons why outsourcing in IT has becoming a growing industry due to the increasing demands of various companies for a custom business application.
 

 
 
 
 
 
 
 
 
Daven Michaels Author of the book Outsource This!

One of the fastest growing industries in the Philippines today is BPO or Business Process Outsourcing. The recent growth in the industry made Philippines outsourcing services the most sought BPO in the South East Asia region. The outsourcing industry begun to experience expansion in early 2000, only a handful of BPO providers and employees were available. But as the BPO sector in the country continues to develop, more and more foreign investors are enticed to explore their opportunities in expanding their business with Philippine BPOs. The annual growth is attributed mainly on several factors like lower labor costs with high quality output, the country’s adaptability to western culture, and a highly skilled pool of workforce.

Next to Canada and India, the Philippines is considered to be the third largest offshore outsourcing destination in the world. At present, the country’s outsourcing industry accounts for about twenty five percent of the global business process outsourcing market which makes it a prime hub for business outsourcing in the South East Asia region. The attraction of the BPO market in the Philippines have enticed giant outsourcing operations for established companies from developed countries like the Bank of America, HSBC, Dell, IBM, Citi Group, and JP Morgan Chase who all have set up contact service centers in the country.

Among the reasons why Philippines outsourcing services experienced a consistent growth in the global BPO industry is due to several factors. Most ideal outsourcing hub in Asia offer competent human resources but none have higher literacy rate than the Philippines. This makes the Philippine labor force superior in education qualifications, not to mention their English language skills that is an advantage for bringing down the communication barrier. The country also offers a strategic location ideal for Western and Eastern companies. This is to say that the country is thriving entry point to millions of people in the ASIAN market.

A lower labor cost can be translated into lower production cost and the good thing about this is that the quality of the output is never sacrificed. Filipino workforce is known for their dedication and loyalty and business companies can take advantage of these characteristics for acquiring a cost effective workforce with all the right values and skills. There is also a growing development in infrastructure which is an excellent enticement for investors. At present, BPO operations key cities in the country branched out to nearby provinces further lowering the cost of hiring employees and operational expenses in general.

According to the independent study performed by IDEA (Institute for Development and Economic Analysis), the outsourcing industry in the country earn annual income of P3 Billion in National Capital Region alone and this figure does not yet include other players in nearby provinces. Although Manila and Cebu is still among the popular choice for Philippines outsourcing, other provinces are starting to catch up in the effort to turn their regions into key outsourcing destinations in the country with lower cost but with higher quality of workforce. This is a healthy competition that forces out other BPO providers to match the quality services offered by BPO counterparts in provincial districts.
 
Daven Michaels Author of the book Outsource This!

Sales outsourcing is the practice of hiring a third party service provider to act as your company’s sales force. Many companies have discovered the numerous benefits of outsourcing the sales force and they have resorted to hiring other agencies to handle their sales functions. Tele-marketing and customer survey are among the outsourced tactics most often used to increase the sales of a product.

One of the benefits of outsourcing a sales force is that a company is able to save a lot of money and gain more at the same time. While running a sales department in house could be a tedious exercise that could cost the company a fortune, hiring a third party service provider to handle such a department could be the best decision for a company to make. An outsourced company is cheaper and the company gets to focus on its core functions thus increasing its efficiency and gains.

Another benefit of outsourcing a sales force is that the sales are increased immensely because the third party service providers are usually a group of dedicated sales professionals who are well trained and can better articulate the product in the market. Since they are dedicated to one major side of the business (sales), the results are usually more significant than when the task is performed in house.

In fact, for new companies seeking to enter a given market, outsourcing their sales force is one of the best decisions they can make. In this case, the business can reap the benefits of outsourcing by engaging a third party service provider that understands the market who will enable the product to gain ground fast. This will shorten the learning curve and reduce the time that would have been wasted in spending a lot of company time hiring and training its in house sales team for this sales task.

Outsourcing a company’s sales force also enables a company to expand into new markets. This is a major benefit of outsourcing because the third party service providers who specialize in sales are usually experts in designated market areas and since their main focus is usually sales. The outsourcing service provider will usually keep a comprehensive database of what sales strategies work best and where.

The benefit of outsourcing is also seen when a company wants to assess the accomplishments of its current sales department in comparison with the industry. This is because by hiring a third-party service provider, one can see whether the internal sales efforts measure up to those of the sales outsourcing service.
 
Daven Michaels Author of the book Outsource This!

Due to the limited funds that small companies have, outsourcing might not always look like the most cost effective alternative for them. Instead, they prefer to do the work themselves and sometimes fear that the outsourced work may not be up to the required standards. This has led to such companies handling very many tasks at the same time. But with this, the small company may end up losing sight on the core activities that generate income thus resulting in stalled projects and numerous losses.

Engaging the services of a business outsourcing company will lead to maximized profits. Valuable tips for successful outsourcing include knowing what to outsource and what to leave out. Outsource the areas that you might feel as a company you are weak at. That way, you get to focus on the parts that are bound to help the organization grow. This might be expensive at first but this will reduce even more expenses that would be experienced when trying to amend mistakes that your employees have made due to lack of knowledge.

Choose a business outsourcing company that you know will work according to your standards. Remember you’re in charge so it is important to be able to point out how you like your work done. Create a good working relationship between you and your partners for the growth of the company. Ensure that you have clear and specific communication between you and your business outsourcing company.

This will minimize the risk of assumptions on either side. It also wise to avoid using internal company abbreviations and internal lingo as this may confuse your outsource partner. Set up meetings to ensure that you understand each other well and the outsourcing company knows what is expected of them. Through this you will be able to make progress.

Up-coming businesses usually fail to keep proper records of their company processes. They usually get caught up in the trap of trying to remember the duties that need to be done when it is already too late. However, having a structured way of handling company procedures will make more sense. A formal structure will be sure to improve the profits a company generates.

If you’re in charge of company operations, always scrutinize what is expected from the business outsourcing company the same way you would inspect the work of your employees. Assumption that all is well might be the downfall of the organization. It is crucial to regularly check on excellence, productivity and turnaround time.

If your business outsourcing company is letting you down, it might be time for you to find yourself a new outsourcing partner. Internet availability has enabled upcoming businesses to contract freelance companies therefore enabling them to cut costs and maximize profits. For this reason, the small businesses are able to still outsource but at competitive rate.
 
Daven Michaels Author of the book Outsource This!

There are benefits associated with outsourcing services such as reduced costs, improvement of product quality and access to highly skilled personnel. This is on the client side. For the service providers, it helps create employment and is a source of foreign exchange inflows where the outsourcing is offshore. But a process outsourcing company in the developing world also faces a number of risks and challenges. An outsourcing company can only succeed if it knows the risks and finds a way to deal with the obstacles it meets during the course of business.

One of the greatest challenges facing the process outsourcing company today is the ever-increasing levels of competition. While at the early throes of the outsourcing services industry in developing countries, there seemed to be more opportunities than there were businesses to provide them, that is not the case today. There are new companies making their way into the market. Countries such as India that have traditional held a dominant position in the outsourcing market have to contend with competition from many other Asian countries such as the Philippines, China, Taiwan, Thailand, Malaysia and Sri Lanka. There is also competition from African countries such as South Africa, Nigeria, Egypt, Ghana and Kenya. Thus, the process outsourcing company that will survive must find a way of adding value to the service they provide to their clientele.

The other challenge facing many a process outsourcing company in the developing world is concentration risk. As the market thins out, one must now compete for lucrative contracts with more businesses. Many businesses must now make do with just one major contract. If that contract is for some reason terminated, such businesses in the developed world may not be able to survive much longer.

Another setback for the process outsourcing company especially the ones based overseas is geographical distance and subsequent difference in time zones. Some process outsourcing companies have to resort to having their employees working day or night shifts. Sometimes, this may lead to the lack of sleep and in the long run, the staff mental and physical health as well as overall morale may be affected. Eventually, the outsourcing company may get into a vicious cycle where it tries to meet the client’s expectations but never has the right employees to effectively perform the work to the client’s requirements.
 
Daven Michaels Author of the book Outsource This!

Today’s globalization, increased competition and rapid technological changes have led most companies to view outsourcing of business as the solution to staying competitive. However despite the fact that outsourcing reduces operational costs and in some cases can help the organization increase its efficiency; it also has negative long term effects that could affect not just the company but the society it operates in as well. A few of the risks and negative impacts that outsourcing exposes organizations to include; unmonitored competition, increased unemployment, unscrupulous providers and possible organizational failure in the long run.

Increased unemployment
Outsourcing of business processes is a relatively new phenomenon that was sparked off by the advent of internet business. As such the full impact of the practice is as of yet unknown, nevertheless it is not the win-win situation that most economists point it out to be. The first major problem of outsourcing can be attributed to the government’s lack of a clear and concise policy that governs the practice. This has bred unchecked and unfair competition among companies in the industry. The tenets of free market economies state that governments should let market forces govern the market, however there is also a need for guidelines that safeguard the existence of small and emerging enterprises. A need that is being largely overlooked thanks to the cut throat competition brought about by outsourcing.

Impact on the local job market
One of the other reasons that organizations give in a bid to justify outsourcing of business to offshore locations is that the labor force is not only cheaper but more educated than the domestic labor market. While this may be beneficial to the third world countries; such as the Philippines and India that get most of the outsourcing work, the impact on the domestic job market is drastic. This had led to most company employees being unsure of their current job security and has thus resulted in low morale levels in organizations. In addition there is the possibility of employees who have lost their jobs going to work for the competition.

Unscrupulous providers
The outsourcing revolution has led most companies to believe that there is no other alternative. So in most cases small companies that can’t afford to set up their own outsourcing departments have to rely on the services of outsourcing companies. However these outsourcing companies handle the business processes for a number of companies, including organizations that may be rivals. In such a situation outsourcing of business may lead to organizations unwittingly exposing their operational secrets.Unscrupulous outsourcing providers may also sell organizational secrets to competing companies or collate the data and use it to start their own business.

Aside from the reasons mentioned above outsourcing may also contribute to changes in the way certain organizational processes are conducted. This leads to a decrease in the efficiency of the company, due to time lapses and delays occasioned by poor coordination which could result in potential conflicts between the company and consumers, the company and the employees or the company and its outsourcing providers. Though outsourcing of business is being touted as the solve all for reducing organizational costs, it should also be noted that in some cases the overall cost of the practice may be more than the additional costs that would have been incurred.

Daven Michaels Author of the book Outsource This!

Outsourcing statistics have for many years now shown the outsourcing of business has been an increasing trend among companies in the US and other Western nations. However, it is since the 1990s that the outsourcing market has grown tremendously. Of course this has also generated a lot of political heat with debates on what outsourcing really means for developed economies and whether it really is for the benefit of their workforce as a whole. Outlined below are some interesting outsourcing statistics.

Outsourcing of business is most significant in the Information Technology industry. In the global outsourcing market, IT takes the lead at 28% of the total outsourcing market. This primarily came about due to the shortage of e- business application developmental skills in developed markets which made it expensive to hire skilled personnel. The Human Resources industry is another increasingly outsourced business process taking   15% share of all outsourced processes. It is closely followed by sales and marketing outsourcing which is at 11%. The remaining fields make up the remaining 32%.

Multinational companies are currently taking the lead in outsourcing. The most popular countries with such statistics are India, The Philippines and China.

Despite the positive statistics described above, there are various problems that accompany outsourcing. Outsourcing of business in foreign countries may lead to geographical problems such as language barrier, labor laws that govern that particular country, political upheaval as well as cultural issues. With such problems being encountered, outsourcing may be hindered.

Before settling on an offshore destination for your outsourcing needs, it is advisable to consider some of the key factors that are affecting the particular country. Some countries may be hindered by poor communication infrastructure, low power generation capability as well as poor disaster preparedness capability. It is also advisable to look into past statistics of offshore outsourcing as well as past success stories of an outsourced project.

In 2006, studies showed that outsourcing activities made up for jobs worth $ 1.2 trillion annually. Economists are forecasting that by 2015, at least 3.3 million U.S jobs and salaries amounting to $136 billion will be moved to developing Asian and African economies. This will come as a result of inexpensive labor markets in the developing countries.

In the U.S, analysts have concluded that outsourcing of business is the biggest contributor to the current economic recession. The statistics have also shown that the high rate of outsourcing has greatly contributed to the delayed recession. For this reason, the U.S could not offer alternative job opportunities for the laid off workers. This has come to be known as over- outsourcing.
 
Daven Michaels Author of the book Outsource This!

If a company is considering outsourcing any part of its business which it considers non-core, it should always find a way of making sure that the outsourcing relationship becomes a success. The business should not only focus all its energy on pushing down costs but in improving quality of goods and services. However, outsourcing management is not such an easy task – but it is necessary if both the business and the service provider want to mutually benefit from the relationship.

Outsourcing management starts with both the business and the third party understanding the goals of the business. This will inform how the performance of the outsourcing processes will be assessed. For best results, outsourcing management must involve both parties being familiar with how the respective internal processes of each party function. Both parties should ensure that the relationship is carried out to the benefit of all parties. Both should also be prepared to face challenges and develop channels for addressing any differences that arise. The records of all communication between the parties should be maintained properly for future reference and to better resolve any disputes that might arise.

The outsourcing company and the business should develop performance measurements around timeliness, product and service quality results, customer feedback, and regulatory and statutory compliance. Even though the metrics defined in outsourcing management are mainly meant for the business satisfaction, they should be practical, realistic, easy to understand and to measure. Vague and unrealistic goals will strain the service provider and leave the service provider feeling shortchanged. Each party should be given the opportunity to frankly start what they would and would not be comfortable with. These measures should be monitored at regular and agreed upon intervals to make sure any issues are identified before they get out of hand.

Communication is key to outsourcing management success. And this must start at the negotiation stage where each party must keep the other well briefed of their decisions and opinions. After the contract is signed, this communication gains even more importance. This will help preempt problems in good time and ensure that the business is always up to date with the significant goings on at the service provider’s business premises. In order to successfully manage the relationship, both parties ought to set aside to communicate with each other daily. This can be through daily meetings or through the exchange of daily performance metrics that keep everyone briefed on the state of affairs.
 
Daven Michaels Author of the book Outsource This!

One of the decisions that companies in the West must make in outsourcing management is which country to outsource the business to. How do the different countries compare and what are the advantages or disadvantages of each? Let’s take a look at some of the more popular countries for hosting outsourced services.

India is by far the leading country in offering offshore services. It has a strong local skill set for IT services, remote infrastructure evaluation and general business process outsourcing (BPO) such as call centers. Indian employees are able to meet the demands of a technology driven market. What’s more their companies have shown precision in keeping records such as employee pay and cost structure. This has seen various US companies outsourcing management of other non-IT areas such as Human Resources (H.R), administration and accounting to India. But in the recent past, India’s reputation as a leader in outsourcing has seen some reputation damage due to issues such as weak adherence to US privacy laws, increase in tax rates and financial scandals.

China is another recognized force in offshore outsourcing management. It also boasts of low labor costs therefore making it a preferred choice for both IT and manufacturing outsourcing. However one of the biggest hurdles to Chinese firms is the language barrier that hinders US companies from recognizing it as a practical location for outsourcing. Little wonder that as part of outsourcing management, American companies are paying a slight premium to English–speaking employees based in China.

The Philippines is another growing market for outsourcing management. Due to its few cultural barriers and relatively advanced infrastructure, it is able to support American operations. Services offered include application development, call centers, voice transcription and server back end management. Nevertheless, prevailing political instability compounded by sporadic social unrest has led some US companies to reconsider IT outsourcing there. The Filipino labor force is also not as technically educated and savvy as India and China. Moreover, the distance between the U.S and The Philippines and thus the wide difference in time zone is also a major hindrance.

Then there is Vietnam which is a budding destination for IT outsourcing management. But like the Philippines, its major barrier is the lack of technical knowledge in its workforce- there are not very many IT experts as would be required to support both local and overseas businesses. This means employing a local IT expert can be expensive.
 
Daven Michaels Author of the book Outsource This!

Outsourcing for business is a fast growing trend and has increasingly been accepted as an integral part of conducting modern day business. The benefits of outsourcing are well known and will usually revolve around time and cost savings. However, just like every coin has two sides, so does outsourcing for business. A company should therefore be careful that these shortcomings, however negligible do not negate the benefits that would otherwise be realized by outsourcing.

The first drawback in outsourcing for businesses is that it poses a major threat to a company’s internal innovation capacity. When a company develops a habit of taking on a third party service provider for key internal processes, the company’s internal knowledge base starts to diminish. Thus, the company’s delivery of a quality experience to its customers may deteriorate since internal staff may not be able to keep up with changing market trends.

Another downside of outsourcing for business is that it sometimes leads to product uniformity and the lack of variety. Over time, outsourcing service providers in the same country may start to use almost identical techniques in the delivery of goods and services to their clients. The result is that competing businesses that outsource to the same country may start to have products whose only difference is in the branding and packaging. Customers eventually latch onto this and it becomes difficult for a business to have a competitive edge in the market since products from different manufacturers become almost indistinguishable in function and design.

Outsourcing for business can also lead to the establishment of a dependency syndrome. This dependence on third- party service providers to carry out important company functions can see the business hamstrung if any of the third service providers were to pull out or collapse without warning. Through outsourcing, a business starts to lose control of its operations. Even though there is a contract between the business and the service provider, the truth is that trust still comes into play in the sense that the business expects the service provider to deliver on what they promise. A business also expects the service provider to be in familiar with certain small nuances that in actual sense can have a major impact on customers.

When a company opts for outsourcing for business, this will almost always lead to the loss of jobs of some of its staff. For businesses operating in a closely knit community, the community may be dissatisfied with the company’s actions. If this belief and perception spreads, it might lead to boycotts of the company’s products.
 
Daven Michaels Author of the book Outsource This!