Outsourcing Introduction Outsourcing is the act of one organization hiring another organization to take over some of its business functions. Outsourcing usually occurs between organizations in two different nations. However, at times there is local outsourcing within organizations in one nation. Outsourcing done between different nations is termed as offshore outsourcing; in such instances the outsourcing organization gets some of its services done in a nation other than the nation in which it operates. Offshore outsourcing differs greatly from off shoring which is a process in which one organization gets part of its business functions done by the organization s subsidiaries located in other foreign nations. Most outsourced services in organizations include marketing services, information technology services, business process outsourcing as well as technical support and services. There are differing views and ideas on the outsourcing process, and decision-making on issues pertaining to outsourcing can prove to be more confusing than anticipated to the managers of any business organization. The dilemmas that exist include doubts on whether to outsource or not and what services to outsource. Companies that make decisions to effect an outsourcing plan also find themselves in a situation characterized by dilemma because they are unable to make a clear decision as to which company to procure services. Outsourcing has greatly expanded in the present day world of business and most firms are realizing the benefits of outsourcing. However, there are many business organizations that do not understand the benefits of outsourcing as well as how to make an outsourcing plan. There are many choices to make in the process of deciding whether to outsource or not as well as when deciding which services to outsource. The process of making an outsourcing plan involves a lot of complicated decision-making (Engardio & Burrows, 2001). As a result, any business wishing to develop an outsourcing plan should review its motives in relation to the outsourcing plan, and find the criterion that would help the organization in choosing a better 1 / 7
outsourcing partner. The organization should also designate methods that will be used in measuring the critical success factors. The preliminary steps in developing an outsourcing plan should include a clear review of the vision of a business. At times outsourcing ventures may not work due to lack of foresight in considering the accomplishments the firm wishes to attain through the outsourcing plan. Failure of the management to determine the direction in which the organization is headed may also lead to failure in an outsourcing venture. The evaluation of outsourcing aspects should not compromise, but be in line with an organization s mission and vision (Engardio & Burrows, 2001). Therefore, any organization planning to outsource should clearly state its goals and objectives and define the organization s mission and vision. After conducting an evaluation on the business s direction the management should critically analyze the organization s entities and functions that will be potentially affected when the outsourcing plan gets implemented. Thereafter, the organization s management team should look at the potential effects of the outsourcing process on the organization s general vision and mission. The evaluation should also involve the definition of the business s core and non-core functions and services. The identification of core and non-core functions is an important element in making an outsourcing plan as well as in determining viability of the outsourcing process. In outsourcing the core organization functions and services are retained in-house. These core functions may include manufacturing and research. The core functions and services vary among organizations, but they basically include the major activities done by the company, and these are often retained in-house. Almost all non-core functions of an organization do not contribute directly to the development of the corporate mission and vision in a direct way. As result, these are the most functions and services that are outsourced to service providers. When evaluating the services to outsource and those not to outsource, the organization assess the clients reaction to services provided by outsourced personnel. If the outsourcing process elicits negative reactions when a certain service is outsourced, the organization may be forced to retain the services in-house so as to be able to attend to the consumers needs in an appropriate manner that will not lead to the lose of the base clientele. After this clear evaluation the business should be able to determine which services they should outsource. After choosing the services to be evaluated the organization s management should establish the profitability of the outsourcing process as well as the reasons of outsourcing (Greaver, 1999). 2 / 7
Services mostly outsourced include company software development, accounting services, marketing as well as customer care services-just to mention but a few. Outsourcing enhances the quality of services delivered because the service providers are specialized in those particular areas, and thus; they are able to offer a professional touch in service delivery. The organization s management is also relieved from some duties, and thus; it is able to dedicate its time to other important functions that may require more attention. In turn, this results to greater efficiency in work because employees are able to concentrate on the delivery of core functions. The making of the outsourcing plan for the actual process of outsourcing follows the establishment of the services to be outsourced. Prior to the making of this plan the involved management team should do wide consultations in order to get view and ideas from those that may be directly or indirectly affected by the actual outsourcing process. (McIvor, 2005). The consultation should also be aimed at developing and defining the scope of the work that will be outsourced as well as establishing a criterion that will be used in assessing the service providers from whom the outsourced services shall be delivered. An organization wishing to tap contributions from the employees should form a broad-based advisory committee. The committee should mainly include members that will be indirectly and directly affected by the actual outsourcing process. This sourcing committee will be in charge of making a request for a proposal as well as the assessment of proposals sent in by the firms that provide services in various fields of outsourcing. An appropriate representative sample should include representatives from the human resource department, finance department, information technology department, procurement department and client representatives. The assembled team should first buy into the idea of the outsourcing proposal, and thereafter offer insight and guidelines on how the actual outsourcing can be made a success. This group should also weigh the criteria that should be used in evaluating the process and its activities such as client satisfaction, technical methodology, cheaper expenses, faster services and faster services. After the assessment of the developed committee the organization should be able to identify services that can profitably be outsourced and the actual cost of outsourcing as well as the advantages and savings or profits that may accrue from the initiation of the outsourcing process. Thereafter, the next step should involve the finding of appropriate service providers that can 3 / 7
provide quality services at a fair price. The identified service providers should have a cultural fit and appropriate technology that will allow them to efficiently provide services. This is the most challenging task for any organization that has decided to outsource some of its business functions. Most organizations may not be aware of how to identify the right company. This has recently been simplified by the initiation of sourcing companies that help organizations to outsource their services. These companies have a wealth of resources that enables them to identify the right service provider on behalf of any company that may seek their services. Alternatively, the chosen staff in charge of selecting a service provider could simply attend trade shows and conferences that may enable them to acquire information on the companies that provide services within the outsourcing industry (Greaver, 1999). Industrial professionals networks can also be relied on to benchmark potentially good firms before the actual process of selecting companies. This eliminates companies that may not fit the match. The review of trade publications can provide information on best practices declared by firms that offer services in the outsourcing industry as well as any attained success after application. The organization s chosen advisory committee and the company s staff should reduce the number of potential bidders before the distribution of the request for proposal. The companies that seem to fit the match and qualifications are allowed to make their bids at the time when the request for proposal is made. The actual selection is done from the list of companies that make the bids. After the selection of the company the organization should work towards fostering a good working relationship with the chosen company that will be providing the outsourced services (McIvor, 2005). This is essential because the relationship between the two organizations should have accountability and a partnership sense that is true. This will allow the two organizations to run their activities in a smooth and well coordinated manner. The process of creating the appropriate environment for developing of a good outsourcing relationship the organization should allow the service provider to explore the organization s business activities and corporate culture. 4 / 7
Transparency should be enhanced through full disclosure in the process of information sharing so as to enable the service provider to work in transparent and efficient manner. In order to create a well coordinated form of integration the organization outsourcing should offer training and orientation programs. These orientation and training programs are meant to help the service providing company to familiarize itself with the organization s way of performing business (Greaver, 1999). As a measure towards ensuring smoother running of activities the organization should establish a continuous monitoring and problem resolution process. After the initiation of the actual outsourcing a mode of assessing the efficiency of the process and functions performed by the service provider should be put in place. There is no guarantee that the selected company will deliver quality services, therefore; it is necessary to continually assess it performance, offer appraisals and when necessary terminate their contract if the services are not satisfactory. If the organizations management is able to determine core and non-core functions within its operational activities, and clearly determine the organizations motives for each activity as well as the goals and objectives of the organization, and put in place an evaluation criterion, then outsourcing should become a source of greater success for the business. Current and future concerns about offshore outsourcing A large number of companies have decided to take up offshore outsourcing. There have been some positive achievements on this, however; there pertinent issues of concern that most firms have to look at before deciding to outsource. Firstly, the organization has to consider the presence or absence of certain infrastructural facilities that aid their businesses. A number of offshore outsourcing destinations lack a network bandwidth that can allow faster communication and others mat have intermittent outages of power. The issue of security is also of great importance because not all nations have high standards in upholding laws such as intellectual property and privacy. Language barrier is also of concern because some of these offshore destinations may have languages different from international languages. The geopolitical climate is also an important consideration in business. Recent happenings have proved that the United States is not immune to terror activities, nations in Asia as well as other underdeveloped nations have political instability which is as a result of political unrest, terrorism and governments that are unstable (Engardio & Burrows, 2001). 5 / 7
This security threats may hamper any service provision from these zones, and thus rendering them unfit to provide reliable services. The difference in time zone does also not allow the direct discussion, consultation and communication of issues as they arise. The prices of service provision have also been on the rise because successful offshore service providers have increased their prices as a result of local competition for labor that has driven the cost of labor higher. The labor backlash is an issue because there are increasing concerns about the transfer of UnitedState s jobs overseas (Engardio & Burrows, 2001). Conclusion Outsourcing has become a common feature in the business and technical world. Organizations are trying to reduce the non-core services that they handle so as to make more time to dedicate to the handling of core functions of the company. Outsourcing not only creates room for dedication to core functions, but also reduces the operational costs incurred if the services procured are provided by companies that charge service charges that are not high. Outsourcing introduces a professional touch to the work done because the organization sources from companies that are well known and highly qualified in offering the services procured. The world has become a global village and most companies have a big clientele in most countries. These companies have to at times outsource the provision of services such as distribution and marketing within each nation that they supply their products. Functions such as marketing work well when they are localized and customized to fit the local environment, culture and language. Therefore, it becomes a necessity of international organizations to outsource their non-core functions. If well implemented, an outsourcing plan can greatly improve the operations of any international or local organization. Outsourcing brings about benefits through enhancing professionalism in service delivery, cutting operational costs and increase efficiency in operations relating to performing of an organization s core functions. 6 / 7
References Engardio, P. and Burrows, P. (2001). Year of the Outsourcer. Business Week, (3714), 95. Gr eaver, F. M. (1999).Strategic outsourcing: A structured approach to outsourcing decisions and initiatives. AMACOM Division American Management Association. McIvor, R. (2005).The outsourcing process: strategies for evaluation and management. CambridgeUniversity Press. 7 / 7