With the never ending technological innovation we experience today, especially in the field of business software programming, gone are 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 applications is the most efficient solution for 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 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 prefer outsourcing their software requirements for custom solutions rather than buying off shelf software. For starters, the main reason 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 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 requirements.

The need for customized software integration in the framework of company’s operational procedures allows 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 after BPO in the South East Asia region. The outsourcing industry began to experience expansion in early 2000 when 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 to factors like lower labor costs with high quality output, the country’s adaptability to western culture, and a highly skilled 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 are several factors. Most outsourcing hubs 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 are 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!

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 has led to company employees being unsure of their current job security and has 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 solution 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 shown the outsourcing of business is 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 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. 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 US, 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 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!

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 revolve around time and cost savings. However, just like every coin has two sides, so does outsourcing for business. A company should 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!

Offshore outsourcing kicked off in earnest with the administration of former American president Bill Clinton. At the time, the U.S had been trying to fight with inflation so as to revive the struggling economy. This brought about numerous changes in economic policies including the implementation of the North American Free Trade Agreement (NAFTA). This saw businesses using this and other means of staying a step ahead of their competition. Due to the high cost of American labor, offshore outsourcing became an option that many corporations had to consider.

Outsourcing has of course been considered by some as too radical a remedy for doing business. This is probably informed by the fact that it has led to many families in American and other Western nations being left jobless and with no source of income. This is because organizations are contracting other companies to render services that were previously handled locally such as payroll, software and customer service. Political interference and what might be perceived as populism has seen offshore outsourcing increasingly portrayed in bad light.

However, the counter argument is that the distribution of resources is important if productivity is to be increased. From this, economic expansion and job creation is inevitable albeit on a global scale. Despite what many might think, the idea of outsourcing dates back to the history of trade. It started with inshore outsourcing (or contracting as it is better known) which came into effect when the cost of in house labor continued to shoot up to high levels such that the profits of various companies saw a substantial drop.

Today, many companies view offshore outsourcing as a means of having an edge over their competitors. It helps bring down labor costs, lowers the payroll taxes the company must pay and get rids of additional costs of staff benefits and training. With the contracted companies taking over certain processes, businesses are in a better position to focus on in house matters such as the production of company reports and staff meetings.

Unions have been at the forefront of encouraging successive US governments to protect American jobs. Which is good. But ironically, some government policies meant to make more jobs available for locals might not necessarily reduce unemployment. For instance, the attempt to ensure that non-American employees are not allowed to migrate permanently to America but only to get training in America before they go back to their country. These are the same persons to whom US jobs will be outsourced through offshore outsourcing.

Daven Michaels Author of the book Outsource This!

In some instances, companies may opt for offshore outsourcing to enable them to focus their attention on the core values of the firm. Paying small scale contractors on the other side of the world is now possible through online payment channels such as PayPal, MoneyBookers, Xoom, Payoneer, 2CheckOut and many more. Outsourcing enables the organization to cut down on labor costs and the cost of procuring expensive technology.

And it is not just American manufacturers offshore outsourcing their work to Asia, South America and Africa. A number of large companies in other countries are contracting American employees for work. For instance, major non-American automobile manufacturers such as Toyota, Mercedes Benz and BMW have set up huge manufacturing plants in the United States. However even as the company tries to maximize its profits, certain ethical questions beg answers.

Offshore outsourcing is gaining popularity among many businesses but sometimes for completely different reasons. Some companies choose this option in order to avoid paying hefty taxes in their home country or adhering to stringent local regulations. Is this ethical? You be the judge. While relocating the entire company may be an option, this may end up costing more in the long run. Therefore contracting part of the work to a foreign company might be the cheaper option.

While employers might justify this move by saying that they are assisting the poor people in developing countries, in the real sense this is all meant to benefit the company. And since it is a for profit institution, many may argue that there is nothing wrong with that. Outsourcing can cause internal discontent and lower employee morale. Some employees may consider offshore outsourcing as a way of showing them that they are incompetent and leaves them feeling inadequate. Of course, this was likely not the intention of the employer. Outsourcing pushes down salaries significantly.

Many other questions may need to be addressed if an organization decides to venture into another country. Certain laws that are being adhered to by the organization in another country may not be applicable or acceptable in their country of origin. Other key ethics questions that come into focus when a company opts for offshore outsourcing include environmental pollution standards that may be more lax in the host country than in the company’s home country.

Daven Michaels Author of the book Outsource This!

Outsourcing of business processes is an organizational practice wherein a company solicits a third party to conduct various activities on its behalf. This solicitation is usually done under contract to a company that either specializes or has the technical know how to best perform those particular activities. Though outsourcing has been around for years; initially existing mostly as accounting outsourcing, its use has only recently become wide spread. This can be attributed in part to the dynamism of the business environment and the continuous pursuit for higher profits at lower costs.

The main goals in outsourcing of business are to reduce operational costs and focus on meeting the primary objectives of the organization. As a result the activities that are outsourced include operational activities such as billing, payroll and customer service call center services. To get a clear view of business process outsourcing, it can be separated into two categories; front and back office outsourcing. The first deals with activities that cater to the consumer while the second deals with processes that deal with employees and internal office operations.

Outsourcing of business in front office, includes activities such as advertising and marketing, consumer service and technical assistance through call centers. Outsourcing of such activities has the positive effect of improving the organization’s bottom line however in some cases it negatively affects them by tainting their customer’s perception of them. Examples of outsourced activities that turn consumers in the USA off are the offshore call centers. Outsourcing technical assistance to foreign countries drastically cuts operational costs but it also increases customer dissatisfaction. Most consumers in North America argue that these offshore center employees are not only hard to understand; due to heavy foreign accents but are also not much help; as the assistance they give is often scripted.

The second category in outsourcing of business processes deals with activities such as logistics, human resource, job recruitment, insurance, credit analysis and collection services. By using this technique organizations can reduce the number of departments they have and in relation personnel. Thus management of the company becomes easier and they can retain a pool of capital that can be utilized for speculative purposes. As competition becomes stiffer and companies are forced to find new profit generating ventures, outsourcing is becoming more of a competitive strategy than an operational option. As with most organizational practices though there are proponents and opponents.

Proponents of outsourcing of business not only argue the improved bottom line but also enhanced services as most of the offshore locations they outsource to have a large base of cheap labor more qualified than their counterparts in the home country. Opponents on the other hand argue that the only benefits of the practice are to the organization and that the job seeking public and consumers do not receive adequate consideration. Unfortunately these criticisms have influenced government legislation and taxation that may eventually reduce the benefits of the practice.

Daven Michaels Author of the book Outsource This!

As opposed to trying to develop all business applications in house, using a software outsourcing company is the way to go for businesses that want to make more profits and offer their clients excellent service. The contracted organization is likely to frequently upgrade its technical knowledge base to be able to keep up with the competition. This is important given that the current business environment requires that organizations be fast paced and efficient. And since technology is ever changing, businesses may not always be able to have employees that have the necessary skills to develop world class software solutions.

Training employees may seem worthwhile at the onset but this will only end up eating into the organization’s capital. All this is what makes software outsourcing increasingly attractive. That said, software outsourcing can be a complex process despite its numerous advantages. It would be wise to select carefully your software provider to get the desired results. Before engaging the services of a software outsourcing company, always ask for work samples beforehand. It is always advisable to look into any references provided so as to assess the quality of work the company does. Make sure that the company keeps up with changing technology trends. The software business is indeed growing at a fast rate. Knowledgeable software professionals are being sought after by business owners, both small and large and this increases the level of remuneration such professionals demand.

In the past, a software outsourcing company was not that common a form of business. However, this has changed as more people see the massive opportunities. The market will always need new software to keep with the ever evolving demands of their clients and the competition. And this advantage applies to both small and larger companies. Despite the size of the company, an organization will almost always benefit greatly from contracting its software requirements as it saves on time and money. Even major software houses such as Microsoft outsource a substantial proportion of their software development projects. This way, the company is able to make huge returns for shareholders by cutting down on expenditure while not compromising on product quality.

All this notwithstanding, it would be important to note that the stability of the software outsourcing company is important for software outsourcing to succeed. An unstable company has direct repercussions on the timely delivery of a high quality finished product.

Daven Michaels Author of the book Outsource This!