Outsource for More Profits

Recently Sony announced at Tokyo that it will be cutting 8,000 jobs which constitute five percent of its total permanent workforce and the rest from the part-time employees as a result of the global slowdown.

According to Sony, the new business plan is expected to deliver more than 1.1 billion in cost savings a year by March 2010.

What is offshoring? Offshoring is a type of outsourcing. Offshoring simply means having the outsourced business functions done in another country. Frequently, work is offshored in order to reduce labor expenses. Other times, the reasons for offshoring are strategic -- to enter new markets, to tap talent currently unavailable domestically or to overcome regulations that prevent specific activities domestically.

The phrase that I think describes the old, outdated approach well is, 'your mess for less', with the outsourced company taking on your operation and simply running it at a lower cost.

Today's corporation succeeds based on its ability to establish and sustain a network of strategic business partners. More and more companies are realizing the benefits in turning around core competencies and outside relationships. "Do what you do best and outsource the rest" is the credo, and for good reason.

Outsource for More Profits

Resourcing allows to free internal resources and allow HR practitioners to be more strategic. Instead of entering data, crunching numbers and pushing paper, HR can focus on core/non-administrative functions. Offloading the administrative work maximizes the organization's resources.

Alternately they can offer access to expertise. Organizations that outsource gain access to know-how they probably do not possess. They tap into a broad network of experienced people and best practices.

There are, however, some common misconceptions about outsourcing, including the belief that it can and will in every situation:

One of the core reasons is that outsourcing cuts costs thereby increasing profits. Although outsourcing will provide cost savings for some organizations (mostly those that are very large and extremely inefficient), in most cases, it is dollar-for-dollar cost neutral.

Take an organization with hundreds of people in HR: If it can save just 5 percent of the $100 million dollars it spends on HR, it will save $5 million. But a company with only 10 people in HR is not going to pay for the service by shifting the work off one or two employees. What will happen is that the department will gain an increase in benefits or services -- more bang for the buck.

Besides, "The capital crunch and cost pressures due to the financial crisis will force enterprises to outsource more of their back office operations to vendors like Sitel for cost arbitrage and access to talent pool. In spite of lower IT budgets, we are upbeat on surviving the crisis and sustaining growth," Adeni asserted.

Multishoring is a trend that mirrors the evolution of IT outsourcing. Gone are the days of 10-year deals being awarded to the traditional global outsourcing providers. The reality of IT outsourcing now is shorter contracts, with a number of specialist suppliers.

Similarly, multishoring enables companies to secure best-of-breed outsourcing solutions, thus tapping into specialist skills sets and maximizing the merits of each offshoring location.

You can have different suppliers, in different locations for different functions. As multishoring takes off, what we're seeing is a trend towards suppliers opening operations in different locations to give companies the option of a multi-shore strategy but with the security of a single supplier contract.

Simply outsource processes elsewhere in an attempt to break from the traditional mould
Use India as one supply location as part of a global strategy whereby elements in which India excels, such as knowledge process outsourcing, will be outsourced to India, but other processes will be nearshored, onshored or offshored to other locations. In terms of costs, India and China remain amongst the cheapest options, yet the tax-free incentives schemes offered by Dubai, for example, are leading to a far greater competition regarding cost in the global market place.


Conclusion - Outsource for More Profits

In conclusion, the new global environment is offering opportunities aplenty to end users. With the emergence of global service provision, end users have the world at their feet and the multishoring 'pick and mix' approach can maximize this.

By capitalizing upon several offshoring locations, possibly in tandem, end users can accrue a low cost offering with the particular skills that are required. India is still a vital cog in the outsourcing wheel, but taking the risk and going elsewhere can sometimes reap massive benefits.

Through innovative outside relationships, organizations are aggressively reshaping themselves and fundamentally changing the way they do business. Unprecedented levels of performance and profitability have resulted from these efforts. The bottom line is that outsourcing has become one of today's most powerful, organization-shaping management strategies. Smart corporations of the future will serve their customers by functioning more as a focuser of resources than as an owner of resources.

Outsourcing a non-core function like the data center to a high quality provider that gives enhanced levels of service at a lower cost helps businesses to compete in today's highly competitive marketplace.

In conclusion, it can be safely said that outsourcing allows freeing of internal resources and allowing executives to be more strategic. Instead of entering data, crunching numbers and pushing paper, company executives can focus on profitability and core/ non-administrative functions. In other words, offloading the administrative work maximizes the organization's resources.

Bottom line - Outsourcing is a necessary component of a profitable company’s business plan. By choosing wisely, a company can be more profitable and efficient by letting other companies take some of the load.