Many businesses seem to prefer hiring an outsourcing company instead of having an in house department perform a certain task. This move is usually aimed at improving capital utilization and lowering overall costs. Companies are increasingly hiring a business outsourcing company to perform both tangible and intangible processes where the company does not have sufficient internal competence. However, as much as outsourcing offers business great opportunities, it also poses challenges to the business and a company ought to be strategic in making any decision to outsource if it is to survive in the competitive world of business.

Some of the most notable downsides of business outsourcing companies are language barriers, differing cultures and sometimes time zones that are wide apart. Such problems pose a challenge to both the client and the business outsourcing company. The other side of the coin is that the opportunities presented by using a business outsourcing service are most significant for service oriented businesses. For instance, if a business needs to have a website, they can select from individuals from anywhere in the world via the internet.

Outsourcing allows businesses the opportunity of being more focused on what they do best. Also, because their competitors may also be outsourcing, the business is in a better position of competing globally. Whereas using a business outsourcing company has the promise of better service for a client’s customers, this is not a guarantee. Sometimes the third party service providers may have a limited supply of people with the right competence. This might be due to lower levels of education among staff in the attempt to source the cheapest labor possible and maximize their profit. This is a problem in many of the world’s traditional destinations for outsourcing services.

Using a business outsourcing company can lead to a substantial proportion of a company’s workforce being laid off. Because this can cause lower morale among remaining employees, it is very possible for outsourcing to lead to a company losing its best employees. This is one of the reasons some people have viewed outsourcing as one the main causes of the loss of  jobs in developed countries and the drop in wages. The counter argument is that outsourcing is reckoned to be a way of bringing better services and products to customers at lower costs and eventually lead to a better economic environment overall.

Daven Michaels Author of the book Outsource This!

Company operators in the business sector are currently faced with one major challenge, increased operation costs. As a result of this challenge, they have to find ways of achieving high productivity within the ‘boundaries’ of their income generating levels. Luckily, they can outsource these specific services for a lesser fee than if they were to employ more workers. Companies that have chosen to outsource these services are now enjoying the benefits of outsourcing such as:

One major benefit that has increased the popularity of outsourcing is cost reduction. Companies that have opted to outsource as a way of saving money can proudly boast of having enjoyed the benefits of outsourcing. When you choose to outsource, you get rid of the extra expenses incurred through management of employees, either through scholarships or training staff to improve on their skills, as outsourcing provides you with already trained employees. Thus, outsourcing maximizes revenue and minimizes expenses.

The benefits of outsourcing also extend to a zero infrastructure costs to be incurred by a company in trying to upgrade its systems to keep up with modern technology. Outsourcing clears these expenses as its hired services are usually updated and well in place. Outsourcing further promotes customer satisfaction because of the high quality services it offers and its timely delivery of these services. The customers will in turn remain forever loyal which is a plus to the company.

Besides these benefits of outsourcing, the company also gains access to specialised services enabling its employees to get more expertise and skill in their fields. It is not advisable for a company to perform all its activities internally as it will lack the “outsider’s perspective” of carrying out some certain activities and hence it might lack competence in certain areas. Outsourcing brings in the ‘outsider’s perspective’ to a company, allowing it to improve in areas it previously could not improve on due to its “insider’s perspective”. Alternatively, this also gives the company an opportunity to save big on money, time, and manpower and to increase its revenue.

Many companies concentrate on fulfilling their core activities first and then turn to the less important ones later, this affects their efficiency negatively. However, a company can perform its main tasks in-house then outsource the less important ones. Doing this will ensure that all tasks are performed concurrently thus taking efficiency a notch higher. This will be seen in the company’s upward increase in profits, productivity and general business performance. Thus increasing a company’s efficiency is another benefit among the benefits of outsourcing.

Companies that outsource also gain a competitive edge to compete with others in the market. Due to the specialised skills offered, customers get top of class services that keep them from the competitors and close to the company.

Daven Michaels Author of the book Outsource This!

When looking for a top business processing outsourcing company, it is impossible to avoid a number of challenges. It is therefore important to lay down strategies that will ensure the maximum realization of the benefits that come along with outsourcing. Thus you should make sure that your strategy is strong enough to ward off any challenge that pops up during its implementation. This is very important because once it falls short of that, your business might be left with a huge negative impact, growth wise.

In order to come up with the best business processing outsourcing company, there are several factors related directly to your business which must be considered. First, it is essential to think about the economic and political stability of the country you are outsourcing these services from if it’s foreign. Since politics and economy are entwined together, it is good to first confirm their stability as a shaky political environment might have a direct effect on the economy of that country, thus affecting your business.

The second thing to consider is the technological and infrastructural status of the business processing outsourcing company you are targeting. This is to ensure that there is no hindrance when it comes to communicating with your clients, otherwise, you might usher your business into massive unexpected losses. Third, consider the qualifications of the staff in the company you are outsourcing. This is very crucial to guarantee the maximisation of profits by your business. Settling for a company that has laidback workers might work to the disadvantage of your business.

There is also a need to look into how the company offers its services. You can gauge this by looking at the hours they work per day or how many days in a week they are operational. Remember the more hours they work the better, since you are assured of enjoying their services at any time, hour and day you need them. In short, a round-the-clock company is the best to outsource from. As a matter of fact, a good business processing outsourcing company will always put the interests of its clients first hence many of them might be willing to adjust their schedule for your sake.

When outsourcing for the best business processing outsourcing company, minimizing costs should be a key factor for deliberation. When outsourcing, a company should look for an easy option on how to cut on high costs. Consequently, one must go for the cheapest company in terms of cost cutting.

In summary, all the above factors should be considered when outsourcing for a good company for the sake of your business’ success.

Daven Michaels Author of the book Outsource This!

Companies try to reduce the cost of operations as much as is practically possible. One way is by outsourcing some of the company’s processes. By engaging a business process outsourcing company, companies can not only reduce their costs, but will also improve the quality of services delivery and free up financial and non-financial resources to other aspects of the business. These advantages have seen businesses hiring business process outsourcing companies to handle the payroll.

But what does a business stand to gain by outsourcing its payroll? First, using a business process outsourcing company reduces the pressure and the risks that come from late payroll filings to the taxman. With someone else handling your payroll who is an expert in payroll processing, US companies can avoid the hefty penalties from the IRS for late or incomplete payroll filings. It is a well-documented fact that the IRS has penalized almost half of all businesses in the US due to incorrect or late payroll filings. Do not let your company be another negative statistic.

Outsourcing your payroll allows only expert and trained payroll personnel to handle and manage it. The IRS also penalizes US companies that are unable to keep up with and apply the tax laws, codes and procedures that accompany payroll management. The outsourced payroll service provider usually has tax experts on board or retainer that provide input on latest legislation around payroll processing and remuneration.

Engaging a business process outsourcing company also allows a business to more efficiently utilize payroll information. The outsourcing services provider will usually have programs that can make it that much easier to not only process but also protect electronic payroll data. Many payroll processors use advanced applications with multiple functions including the ability to process and complete an employee’s W-2 form electronically. If there are problems with the information, corrections are easy to carry out and can be quickly applied before the next payment cycle. Payroll software is far better than a manual payroll processing procedure.

Your business can dictate the terms of service to the business process outsourcing company and develop a service level agreement that the outsourcing company must commit to as condition for the continued business relationship. If you are unsatisfied with the service offered by the outsourced company, you should have an exit clause that allows you to move the payroll process to a more capable company.

Daven Michaels Author of the book Outsource This!

Offshore outsourcing is the process of contracting business processes to other companies or freelancers based overseas. Offshore outsourcing has been successfully carried out on different processes including customer service, technical support and data entry. The internet, as well as access to high speed network infrastructure in more and more countries, has made outsourcing to other countries possible. Highly skilled personnel can be engaged at a low cost from anywhere in the world. The companies that use such a business processing outsourcing service lower their operating costs and are able to focus on other aspects of their business.

Offshore outsourcing has mainly taken up four main business processes. First is Information Technology Outsourcing where a company’s information technology is outsourced overseas. The second major business processing outsourcing service is call center management. The third is Research and Development while the fourth is knowledge process outsourcing. Knowledge process outsourcing is simply a special type of outsourcing that requires the use of highly knowledgeable experts in performing a task.

Opponents of offshore business processing outsourcing service have touted it as a bad way of doing business that depresses a country’s wages. Work is sent to other countries at rates that are much lower than those of the originating country. Workers in the company outsourcing its services stand to lose their jobs. This in time and on a large scale can affect the economy of the home country negatively. The use of a business processing outsourcing service has also been criticized as the cause of a decrease in service and product quality. Language has also been one of the greatest barriers and is still a major obstacle companies in an outsourcing relationship have to deal with.

Those that support an offshore business processing outsourcing service argue that offshore outsourcing has not only lowered the operational costs of the companies that use this service but have subsequently maintained or lowered the costs of the end product. Companies that have used such services have found that outsourcing jobs has increased their profit margins not only because of reduced expenses but also due to the ability to better focus the company on activities that can and will drive profits. Offshore outsourcing has allowed numerous jobs to be created in the countries where the outsource service provider is based. There is no doubt that offshore business processing outsourcing service providers are here to stay.

Daven Michaels Author of the book Outsource This!

If you choose to engage an offshore outsourcing company for your business, it is important that you understand the outsourcing model that will best meet your business goals. Choosing the wrong business model can be a risk to your business especially if you are outsourcing a critical function. The types of offshore outsourcing business models can be looked at from two perspectives – Ownership or Relationship structure and Geographical location.

The Ownership structure is further subdivided into three different areas – pure contract offshore outsourcing company, joint venture and captive offshore subsidiary. Pure contract offshore outsourcing involves the full control of the business functions by the 3rd party. The provider fully controls the operations offshore with the use of cheap labor only delivering the product or service to the client. A joint venture allows the combination of resources from two or more companies to produce a single business entity that is established to carry out a certain project within a given time frame. Usually, a joint venture is created by businesses in the same industry. For instance, a group of financial services providers may opt to establish a disaster recovery site that caters for their diverse needs as opposed to each firm setting up and maintaining its own disaster recovery site.

A captive offshore subsidiary is created by a parent company located in a different country. The subsidiary is owned solely by the parent company. When it comes to geographical location, a business can outsource to an offshore outsourcing company, an onsite outsourcing company or an in country offsite outsourcing company. Each of these models has its strengths and weaknesses. But let us first look at the meaning of each of these models. An onsite outsourcing company provides the services from within their client’s premises. The service provider brings their own workforce. This is ideal where product needs to be delivered to the client relatively fast and the client requires to have close supervision of the process.

In country offsite outsourcing is where the processes are moved to an outsource service provider based in a different location but within the same country. The service provider is responsible for obtaining premises to carry out the task. The third type is the offshore outsourcing company. In this case, the service provider is in an entirely different country. Offshore outsourcing is often the most complex but also stands to provide the most benefit for an institution in terms of cost, access to a highly skilled work force and growth in the international reach of its products.

Daven Michaels Author of the book Outsource This!

There are various factors you must think about when deciding whether to use an offshore outsourcing approach or the onshore outsourcing model. These factors vary from budget needs and accessibility to language and culture. Offshore outsourcing involves engaging a 3rd party organization that is situated in another country. Onshore outsourcing is also referred to domestic outsourcing which means the business hires a company within the country it operates in.

One of the many strengths of onshore outsourcing is that it is possible to have a face-to-face conversation with your outsourcing partner when the situation requires it. Language barriers and adaptation of new business culture is not an issue when using onshore outsourcing services. Outsourcing domestically therefore provides a familiar means of communication with your outsourcing partner. Unfortunately, outsourcing locally especially in developed countries such as the US is very expensive. Onshore outsourcing is not only more expensive than an offshore outsourcing partner but can also be more expensive than doing the process in house.

It is because of these drawbacks that countries in developing countries such as the Philippines and India have become ever more attractive as destinations of outsourcing services. The availability of the Internet has also enabled businesses to contract freelancers from all over the world. Such freelancers can complete the projects given to them at a much lower cost than an in-house salaried employee. This increases the capacity of small business’ to compete with larger corporations.

Workers in these countries can meet a business needs at a low cost. In fact, direct financial savings is the most powerful argument for the offshore outsourcing approach. As compared to domestic outsourcing in developed countries, labor is relatively cheaper due to the low minimum wages in these countries even for highly skilled personnel. Offshore outsourcing service providers in these developing countries have over the years grown and developed advanced infrastructure that enables them to provide world class services.

But offshore outsourcing has its downsides. There are costs to outsourcing offshore mainly around travel expenses and the language barrier. Language is especially an issue when outsourcing call centers and programming tasks that require some minimum level of competence in language. Also, offshore outsourcing is not always cheap across the board. Procuring the services of the best and most reputable offshore companies does cost and may in certain cases override any costs savings a business may have hoped to gain from the relationship.

Daven Michaels Author of the book Outsource This!

Outsourcing is the process of offering jobs that can be performed by a company’s own employees to skilled people who are not part of the company’s actual workforce for a certain period of time. When outsourcing the company’s management is usually concerned about the end results of boosting their growth levels. While some companies view outsourcing as the only option to their success, others see it as a waste of time, energy and money. However, it is advisable to understand what the outsourcing benefits are before utilizing it.

Outsourcing benefits are many and usually vary from one company to another depending on their divergent needs. When a company outsources, it is able to focus purely on its core activities essential for its growth. Outsourcing ensures that as the company gets bigger the resultant growth does not in any way undermine these key activities, which are the main pillars of the company’s success. This is because as it expands more resources are needed and outsourcing will facilitate the equitable distribution of these resources and services within the company.

A company’s increased ability to take full control of its employees and promote hard work is yet another of the outsourcing benefits. Outsourcing enables the company to let go some of its workers when the work output is below par and recall them when there are improvements. In addition, outsourcing ensures that there is some level of continuity and consistency in the company in case some of its employees, especially those holding high positions, decide to leave in a short notice period. Through outsourcing, an imminent vacuum in the company is avoided.

Outsourcing also offers an opportunity for employees to learn and acquire more skills from experienced individuals in their field of work. This benefit adds on to the list of outsourcing benefits. Once the employees work hand in hand with experts in their fields, they get to learn things that will in the long run become helpful to the company once the outsourced staff leaves. Furthermore, outsourcing also lowers the operating costs in a company which are mostly a result of pronounced growth. It enables the company to operate within its income turnover without incurring a lot of unnecessary expenses.

Another one of the many outsourcing benefits is that it helps a company maximize on its profits by cutting down on some costs, and at the same time engineering effectiveness amongst the company’s employees. The company may prefer to hire professionals in a certain field; this will eventually work to its advantage, as compared to when it hires less qualified employees. Outsourcing also helps a company to take maximum control of operations through the enhancement of better managerial skills.

Daven Michaels Author of the book Outsource This!

Outsourcing has been on the lips of business leaders everywhere for a number of years now. And yet, there is sometimes confusion on just what outsourcing and an outsourcing company is. That said, despite the different views on what outsourcing really is, the common thread is that it involves an organization handing over one or more processes to a 3rd party to execute at an agreed fee.

There are different types and elements of outsourcing that every business can consider. One is the outsourcing of value added services or of key support functions. This may be as ordinary as providing support services to a company or as complex as taking on core business operations. Support functions an outsourcing company may provide include technical IT support, Human resources, Cleaning services, Accounting services etc. The value added services provided by these companies may include Sales, Purchasing, etc.

Partial or Total outsourcing involves the process of partially outsourcing business process or completely outsourcing an entire business operations. An example is a company that provides customer care services. It may choose to outsource this department to an offshore outsourcing company due to the affordable expert knowledge found there.

There is also outsourcing of only operational functions such as outsourcing human resources versus outsourcing of functions, tools and personnel such as IT outsourcing. Business Process Outsourcing involves the use of outsourcing companies that carry complete responsibility of the operations they undertake. This approach requires a clear-cut definition of the roles and responsibilities expected to be undertaken by the outsourced company.

As said before, they are numerous benefits of outsourcing companies. The organizations that choose to outsource their business operations are able to focus on the core businesses. They can concentrate their efforts and resources on the core businesses. These organizations also reduce the operational costs. This creates a flexible cost structure that is directly related to the performance of the service provider. The organizations have access to competent personnel at cheaper rates. Outsourcing companies hire highly skilled personnel that increase the quality of services they provide.

An outsourced project undergoes the following phases before it is completed. Phase 1 is the planning and preparatory phase. This phase involves baseline analysis, determining future procedures and defining the goals and expectations of the project. Phase 2 is the initiation phase and it involves the contract negotiations with the provider. Phase 3 is the implementation phase and it involves the transfer and set up of the facility and the actual start of operations.

As for the continuous life of an outsourcing initiative, there are only two phases involved. Phase 1 is the review and evaluation of the relationship and implementation processes. Phase 2 involves the renewal of contractual terms or its termination that transfers all business functions either to a new service provider or to the organization.

Daven Michaels Author of the book Outsource This!

Outsourcing for business entails giving out business functions to a service provider who is not necessarily a part of the company. Since the early 1990s this trend (outsourcing) has continuously expanded worldwide due to globalization. This has resulted in increased competition and labor shortage especially in the developed countries. It is believed that an outsourcing strategy can positively impact the efficiency of a business through the promotion of sound management.

It took a short period of time for companies to realize that outsourcing for business provided new ideas and fresh approaches of doing business in the business sector. As a result new talent, modern technology and advanced techniques that could fire up efficiency within a company and cut down costs came about. And as outsourcing continues to evolve, companies will be in a good position to deliver measurable client service and be able to compete vigorously with other players in the business field. However, they must be able to tackle several challenges in order to acquire a bright future.

Although some of these challenges will be external, others will be as a result of internal factors within the companies themselves. For example, they will have to put in more resources and structure themselves to be in a position of transforming their short-term cost savings into consistent efficiencies that can support new business projects within the company. Since, the savings they acquire from cost cutting at the moment are short-term; these companies will have to strategize on how they can transform them into permanent resources for the sake of other outsourcing for business ventures in future.

There is another challenge of risk taking which is the main stumbling block towards a brighter future in outsourcing for business. In the process of cutting down the costs, unexpected risks will arise. It is thus the company’s obligation to devise a proper risk management plan. Unless this is done, even the cost cutting aspect companies enjoy will eventually turn out to be a waste. These risks arise from factors like language barrier, in cases where a company hires a wrong service provider and political instability of the government where a company outsources from which affects the economy.

Even with these challenges, the future of outsourcing for business is still certain. As the decisions these companies will make today in terms of their policies will determine a lot of how the future will turn out. Equally, the increased demand by these companies for further cost reduction will also greatly decide what the future holds for business outsourcing.

Daven Michaels Author of the book Outsource This!