Outsourcing Times

Sin & Offshoring

Agreed that most organizations that outsource operations to offshore environments consistently save money by taking advantage of lower labor costs. However, what they don't realize is that most offshore initiatives could do much better at improving cost efficiency. Evidence suggests that poor planning, shoddy implementation and ineffective management are endemic to both captive and outsourced offshore projects.

These problems could result in lower profits or even losses. Usually, the failure is not due to lack of capabilities, experience or resources. The main reasons are simple human failings like laziness, greed, arrogance, etc. I know it seems a bit difficult to believe but to put it simply, good old-fashioned sin is to blame. Cio.com reports:

Don't be lazy. Don't "lift and shift" and settle for a short-term cost reduction without considering the long-term implications. Baseline performance before offshoring, and address performance issues before moving. At a minimum, develop a performance improvement plan for the offshored operation. Better still, re-engineer the operation before offshoring. Invest in building solid processes and an onshore management framework, and offshore, invest in training and orientation to make offshore staff part of the global organization and to create a sense of belonging.

Read more: A Sinner's Guide to Offshoring

Insurers Cut Costs By Outsourcing

By Priya Jestin, Staff Writer

While most of us may still deride the outsourcing phenomenon, fact is we cannot do without it any longer. The main reasons most firms have taken to outsourcing is that it allows them to focus on their core strengths. In an insurance firm, most of the services including human resources, billing and transactional processing, are important but not necessary in the proper functioning of the core competencies.

So what can a business do to ensure that it focuses on its core competencies without having to trouble itself over the peripheral activities? It can use a business process outsourcing (BPO) provider. This not only reduces costs but also allows a business to grow as the enterprise can now focus on its core business.

Since this is extremely sound business advice, it’s not surprising to note that insurers have taken to outsourcing like fish to water. Research shows that the use of IT outsourcing and BPO is slowly growing.

Outsourcing The Buyer

2007 will probably be the year procurement outsourcing grew out of the shadows and became a big part of the outsourcing industry. As of now, China is the favored destination for offshoring. Supplymanagement.co.uk reports:

Analysts at the Everest Research Institute say that outsourcing the procurement function of a company could provide five times the savings usually gained from outsourcing other departments. With an incentive like this, it isn't surprising that more buyers and suppliers are attempting to get into the market…Yet cost savings are not the only motivation. Buyers and those further up the corporate hierarchy are pointing to improved efficiency, smarter strategic sourcing and the enhanced compliance that outsourcing brings.

Read more: Buyer, outsource thyself

Phenomenal Growth in Global Market for Hosting Services: Report

Research and Markets, a market research resource, recently announced that it would add Infrastructure Outsourcing and Managed Services to their offering. The firm says outsourcing enterprise infrastructure can refocus a business on its core competencies while reducing costs. Topshots.com reports:

With a forecast of $39.4 billion in 2006, the global market for hosting services represents the largest opportunity for IT services providers within the broader managed and outsourced infrastructure services market. For more information you can visit the website.

Read more: Global Market for Hosting Services Represents Large Opportunity

Near Shoring To Become Norm in ‘07

By Priya Jestin, Staff Writer

Luxoft, one of Russia’s leading providers of IT outsourcing development and services to companies like IBM, Dell, Deutsche Bank, T-Mobile and others, recently issued its predictions for the IT outsourcing industry in 2007. According to Luxoft, no one approach – in-house, on-site, ODCs or captive models – will be on top in 2007. Each company will access its available global resource and skill pool and choose a variety of outsourcing and in-house combinations to reach its desired business and technical goals. Outsourcing, say Luxoft officials, will become as commonplace as Six Sigma.

This bit of news should bring a lot of cheer. It is expected that in 2007, all forms of security will make it on to the shortlist for any successful outsourcing engagement – system, physical, staff and disaster recovery. Clients will increasingly demand excellence on this front. Also, companies will increasingly look to near shore development solutions to round out its outsourcing portfolio. In 2007 there will be increasing demand for outsourcing resources in Europe, Eastern Europe and Canada but this phenomenon will be seen with resources around the globe.

Public Outcry Against IU Outsourcing Decision

By Priya Jestin, Staff Writer

The idea of outsourcing doesn’t seem to have gone down well with legislators in Indiana. Three state lawmakers recently urged Indiana University administrators not to outsource some school operations, as they felt that the move would harm the region's economy.

Democratic Reps. Matt Pierce and Peggy Welch, of Bloomington, and Sen. Vi Simpson, D-Ellettsville, are joining a growing tribe of dissenters in Monroe County and Bloomington in voicing opposition to the proposal. Their contention is that outsourcing will suppress wage and benefit growth in the region.

So what is it that is irritating residents of these counties? University administrators are considering plans to hire private companies for operations such as campus bookstores, food services and printing services. This proposal is sure to affect jobs at all IU campuses. Wonder if all this is the proverbial storm in the teacup.

Outsourced Burgers

The next time the lady at the drive-through burger joint asks you if you’d like fries with your burgers, you’d probably need to pinch yourself to realize that the lady is probably miles away. What’s happening? Outsourcing! Boston.com reports:

Already, Wendy's says the call center is paying off. Drive-through sales jumped 12 percent at the six stores that installed multiple drive-through lanes that are connected to a call center, according to Kevin Fritton , executive vice president of 256 Operating Associates , which runs the call center and 14 Wendy's restaurants in New Hampshire and Vermont. The call-center employees, who earn about $8.50 an hour, are trained to urge customers to add items to their order and are timed on how long each call takes.

Read more: Miles away, 'I'll have a burger'

Homecoming

Imagine virtual contact centers that tap high-caliber workers with industry expertise, and connect them through a network of home-based agents across the US. This idea could revolutionize the way businesses interact with customers. Only thing is, it is no longer an idea; it’s a reality. Businessweek.com reports:

Several factors have contributed to the homeshoring trend and will continue to fuel growth in the coming years. Among them are technological advances that make it easy to set up and monitor home-based agents. Consider the increased availability of high-speed Internet connections, as well as innovations in Voice over Internet Protocol (VoIP) technology, which can add a host of features to calling plans, while reducing the price of telecommunications.

Read more: Bringing the Workforce Home

Home Calling

While we are fretting and worrying about the outsourcing phenomenon we may have failed to realize that the trend is changing. Nowadays, increasing number of companies are choosing to keep their call centers in house rather than send them elsewhere. Banks in particular have decided that the customer care that happens in the call center is too important to trust to a third party. Yes, it does end up costing more to work from home, but there are obvious benefits to home shoring.

For example, U.S. Bancorp is one company bucking the call center outsourcing trend, despite the obvious financial benefits of sending work offshore. According to Celent, companies spend $6.85 per call to serve a customer compared with $4.95 for e-mail and 50 cents by Internet. Banks on average spend more than $5,000 to hire and train one agent. In the U.S., such workers generally make at least $10.50 an hour, 90 percent more than their counterparts in India. Itbusinessedge.com reports:

Yet U.S. Bancorp has poured $20 million into its five call centers across the U.S. over the past two years and employs 1,400 agents, who handle some 73,000 calls a day. At least one analyst interviewed here says it's a smart strategy because of the importance of the call center in retaining bank customers.

Read more: Bank Bucks Call Center Outsourcing Trend

Now, Outsourced Lawyers

By Priya Jestin, Staff Writer

How would you fee if all the jobs at General Motors suddenly moved to China? Chances are you wouldn’t think twice about it. Why? Because for quite a few years now, it’s been the Chinese, Taiwanese and others who’ve been at the helm of the manufacturing industry. Moreover, the manufacturing industry isn’t as paying as say the software or banking industries.

But if major corporations began to work with lawyers in India, you’d definitely have a big problem. That would be a breach of security and well, how can we trust these guys with important information? Well, if you didn’t already know, the practice has been on for some time now. Corporations like Oracle, Cisco and General Electric are some of the big names that have begun trimming their legal costs.

According to a recent report by Crisil Research and Information Service, the legal offshoring industry is expected to grow to $4.7 billion by 2012 in India alone. Of course, it’s the cost advantage. Who’d want to pay an American lawyer $200 or more an hour when you can get an Indian lawyer for anything between $50 and $70 an hour? If you want to go even cheaper, you could get an Indian lawyer working as a temp. It would cost $20 an hour or less, which when compared to $70 an hour for a temp in America, works out to the Indian’s favor.

Until quite recently, lawyers were immune to the offshoring phenomenon and didn’t have to worry about losing their jobs. This was mainly because their work was steeped in arcane U.S. law. It also often dealt with sensitive information companies feared could fall into the wrong hands. But that reluctance is fading now.