Outsourcing Times

100 Small Business Tips and Tricks for Effectively Outsourcing to India

Who said small businesses can't outsource? There are ways to send your writing, IT tasks and other needs overseas to add efficiency to your enterprise. By doing some prior planning and following some pointers, you can get the quality help you need.

For 100 specific tips on how you can leverage India, visit HRWorld's, 100 Small Business Tips and Tricks for Effectively Outsourcing to India.

China: Painful Outsourcing

Are you planning to outsource your manufacturing to India? Hope you are aware of the risks associated with outsourcing to China. You may have to face quality problems, delay in deliveries and worst of all, theft of your intellectual property. Most people believe that all these problems arise because we don’t understand either the language or the way business operates in China.

One businessman recently discovered that even knowledge of both language and business operations modes doesn’t really help. Edward Wu's experience may not be so unique nowadays as an increasing Chinese Americans try to set up base in their home country.

Despite efforts by the Chinese government to rein in counterfeiting, experts say manufacturers there can undercut their clients by producing similar products at cheaper prices in as little as two years. And Chinese American entrepreneurs have less of an advantage than one might expect. While they may initially get a leg up, economic factors soon trump everything else.

Want to know more? Read on…

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

Outsourcing & OEM Direct Costs

At the TFI's Quarterly Forum recently there was one point that seemed to come up pretty often. That of the knee-jerk reactions of OEMs and their manufacturing partners to the challenges of global electronics manufacturing. The fact that this mode of functioning doesn’t work is pretty obvious. Most of these people seem frustrated with the tactical measures required to meet environmental regulations such as China RoHS.

They are also finding it increasingly difficult to find profitable and socially responsible ways to manufacture the low-volume, high-mix products that represent the next wave of electronics outsourcing for the global arena. One attendee from an OEM member company succinctly expressed this frustration: "I am so tired of the fire drills for WEEE, RoHS, and now China RoHS."

What they don’t realize is that there IS a better way. It’s actually now a time to reconsider their management strategies. In the first wave of outsourcing, OEMs' transferred their manufacturing costs from their bottom line to that of the EMS. Now, they must focus on their internal management costs. They must find ways to increase the efficiencies on the supplier interface and the first step toward this is knowledge.

The best way to gather knowledge is to check out TFI's 8th study on environmental requirements, which focused on OEMs' performance and paths to profitable compliance. The research on electronics manufacturing in India uncovered several trends: Based on a Web survey of over 400 electronics industry managers, TFI projects that the number of electronics companies selling product in India will rise by 24% in the next two years.

Moreover, the number of companies manufacturing in India is expected to rise by 63% during the same period. India’s major attraction to most OEMs and EMS providers is the huge local market, which they can serve. This differs from the typical manufacturing strategy in China. The question for OEMs and EMS providers is the size of India's consumer electronics market.

Sharp Initiates Reverse Flow

Now this is what I call a reverse flow. Sharp Document Solutions Co. of America, a division of Japanese consumer electronics maker Sharp Corp. recently announced its plans to establish a network of 20 branches in America over the next two years. Reuters.com reports:

It is forming a new division, Sharp Business Systems, which opened its first branch on Wednesday, in Phoenix, Arizona, through acquisition of local company Davidson Imaging Systems. It plans to open the other branches, in major U.S. cities, through similar acquisitions.

Read more: Sharp to establish outsourcing network in U.S.

Fuel, food, and outsourcing come together at Shell

When you visit a gas station, it is no more a mere matter of filling up your vehicle. The modern marketing technique has taken over, and you should not be surprised if you get several fringe services to go with the fuel.

For instance, you could walk into the food outlet that is invariably a part of fuel stations these days, and bite into an appetizing snack.Thus, fuel and food go hand in hand these days. However, managing the food outlets at fuel stations is an important cog in the wheel.

In Bulgaria, Shell has 85 filling stations, and the company has now decided to outsource the management of the food outlets in at least 60 of these stations to the ice cream company Jimmy's. Under a five-year contract, Jimmy's will add the jest for food at the select Shell outlets across the country. According to a news report:

The management of the Select outlets, the brand under which Shell operates its food service stations, would represent a new business experience for Jimmy's. The company has so far operated as an ice cream producer and owner of a chain of ice cream parlours.

Jazz Semiconductor to Increase Foundry Outsourcing

Jazz Semiconductor will increase the proportion of its outsourcing to China-based foundries to 60% of the company's total output in the future. Jazz has taken a cautious approach to expand its own capacity. It will widen its collaboration with China-based foundries Advanced Semiconductor Manufacturing Corporation (ASMC) and Hua Hong NEC. About 80% of Jazz's output is from its own facilities and 20% from China. However, in future, the proportion of outsourcing to China will increase to 60%.

Read my previous post titled “China into Service Outsourcing”

Outsource vendors turn journalists!

How often in the past have you struggled over the composition of a press release to highlight your company profile? How often have you amassed a lot of paper research and didn't know where to turn for fine tuning it? And, how often have you thought of launching fancy newsletter for your organization but kept it in abeyance because of a lack of time and know-how?

Well, thank heavens for outsourcing, you can complete all these tasks through a third-party. Outsourcing is no longer confined to the twin pillars of call centers and IT; there are professional service providers who will write, edit, fine-tune, and produce any literature you require—be it something as simple as a company profile, or as complicated as a book on world religion.

This market segment is still in its infancy, but it is certainly gathering momentum and set to sweep across America, Australia, and Britain into India. Yes, India is likely to be at the center of this media outsourcing stage, as it has been for other outsourcing market areas. Rosemary George, of Bangalore-based Flatworldsolutions notes:

Most of the work we are doing is for American and British clients and which deals with press release writing, making newsletters and article submissions. There is no dearth of skilled manpower in this area. India has a large pool of writers and the work today is being taken both by freelancers and specialised media companies.

As The Hindu reports, marketing of Indian entrepreneurs in this arena is going to be critical in taking this outsourcing business to the next level.

Mid pharma Outsourcing Pipeline

Mid pharma companies are expected to increase their reliance on products discovered outside the in-house pipeline over the next few years in an effort to boost revenues while reducing R&D costs. Mid pharma has traditionally relied less on externalization. It appears that outsourcing of products has become more prevalent in mid pharma. Experts believe that most of mid pharmas' growth will come from outsourced products. The main externalization strategy mid pharma companies will employ is in-licensing, which involves licensing the intellectual property rights to develop and market a product from another company in exchange for an up-front payment and milestones and royalties.

Read our previous post titled "Outsourcing Managed Security Services", which will give you more information about outsourcing.

Outsourcing Tips for Small Businesses

The promise of saving time and money by exploiting technology and inexpensive labor has driven companies to opt for outsourcing. Experts believe that millions of jobs will be outsourced to overseas destinations in near future. Before outsourcing your business, you must know the strengths and weaknesses of your business. Selecting a vendor is tough for large companies with huge budgets. You can browse through several websites to find a reliable partner. The following websites can be helpful on this regard:

Elance
iFreelance
ScriptLance
Rent A Coder
Get A Freelancer

Most companies get nearly 1000 new projects on their site every week. Before choosing a vendor, make sure that they sign a snag-proof contract. They must agree in writing on an arbiter before disagreements crop up. While drafting a contract, clarify not only the specific services you expect to receive, but also the quality of the delivery.

You can read our old post titled “Choosing the Right Time for IT Outsourcing” to know more about IT outsourcing.

Now It's the Turn of Mortgage Lenders to Join Outsourcing

In the past couple of years, we have been receiving news on how industries one after another are outsourcing their jobs to low-wage destinations. Now it's the turn of mortgage lenders to join outsourcing wave. According to NelsonHall, the leading independent BPO analyst firm, mortgage lenders in the United States are outsourcing their work to India and other countries. In the recent months, mortgage industry has emerged as a strong force in the US and elsewhere in the world.

The high demand in mortgage products and services has forced the lenders to choose third party companies that can manage their work efficiently and effectively. Now customers want their mortgage BPO providers to add cost of processing to volume processing so that costs can be better matched to business volumes. It forced mortgage organizations to look for an improved process compared to their in-house capability. According to NelsonHall report, the global mortgage BPO market will double in size over the next five years.

Weavers in south India: Weaving an outsourcing network

Outsourcing is usually practiced across cross-country borders. However, there is a smaller play alive and kicking within India. Weavers formerly engaged in the production of the famed Mangalagiri sari in south India are facing the crunch of rising production costs and excessive trade unionism, and are now outsourcing production.

Between Srikakulam in the north and Prakasam in the south, a network of weavers produces the Mangalagiri handloom. No longer confined to Mangalagiri, the "Mangalagiri handloom" product has developed as a brand, and this “grassroots-level” outsourcing will continue to thrive so long as the outsourced products maintain the same quality and finesse.

Read more.

Corporex Begins Outsourcing

Corporex has outsourced its leasing and property management operations to two area commercial real estate firms. The company now began to focus on development and investment opportunities. While Corporex used to deal directly with most of its tenants, now 90 percent of them employ tenant brokers.

Colliers Turley Martin Tucker and Grubb & Ellis/West Shell Commercial are the two firms that will manage Corporex's operations. According to Corporex sources, the decision was taken to focus on development and investment and to leave day-to-day leasing and management of its properties. The outsourcing arrangements will affect 22 Corporex employees. In addition, a few jobs have been abolished.

According to The Inquirer -

Banta said the deals are based on short-term contracts, but that Corporex hopes the relationships are long term. The operations of Corporex-owned hotels and its Five Seasons Country Clubs have not been affected.

Euronet to Provide Outsource Business

Euronet has decided to provide a range of day-to-day ATM outsourcing services and value-added network services. Euronet is an electronic payments provider. It has expanded its ATM outsourcing agreement with Centurion Bank of Punjab. As per the new outsourcing deal, Euronet will manage 408 ATMs of the Centurion Bank of Punjab (CBOP). Currently, Euronet operates 164 ATMs of the former Centurion Bank. Under the expanded agreement, CBOP will outsource the remaining 244 ATMs from its current network to Euronet India within the next 30 to 60 days. Euronet India will also provide value-added network services to the bank in the form of mobile phone recharge through ATM, SMS and the Internet channels.

According to EFY Times -

Commenting on the alliance, Anil Jaggia, chief operating officer, Centurion Bank of Punjab, said, "By outsourcing our ATM network services to Euronet, we are able to focus more resources on establishing a full-service commercial bank with strong retail and SME presence across the country."

BT and KDDI Partnership on Network Outsourcing

BT Group, Britain's largest phone company and KDDI have announced that they would form a venture to seek voice and data network contracts from Japanese corporate customers. Sales from the joint venture could rise to $1 billion. According to BT sources, revenue will probably reach that level in three to five years. The joint venture will start in August 2006. The alliance will help KDDI in raising its earnings from fixed-line telephone business. BT is part of outsourcing markets in Japan worth about $90 million. This is twice the combined size of the rest of the markets in the Asia-Pacific region.

According to International Herald Tribune -

In Japan, KDDI and Nippon Telegraph & Telephone are looking for ways to generate gains from wire-based services as competition brings down prices and more subscribers switch to wireless phones. In November 2004, BT and KDDI teamed up to offer global networking services to companies.

Consero brings Outsourcing Benefits to Small Firms

Consero Global has launched Consero that provides offshore, outsourced accounting and finance services that include financial reporting, budgets and forecasts. Consero Global is headquartered in Austin. Recently, the company has opened its office in Bangalore, India to manage outsourcing business. Traditionally, large companies target big-sized businesses. However, Consero targets small and medium businesses that have revenue of $10 million to $200 million.

According to company sources, Consero's services will help smaller companies that compete against the large organizations for survival. They find Consero's services useful, as they are often unable to afford costly services. Consero also helps companies save money by outsourcing accounting and financial services. MSNBC has an article that provides detailed information on the Same Topic.

Outsourcing to SMBs

Outsourcing has been the exclusive domain of large comanies for a long time. However, the situation has changed now. Small and mid-sized businesses are getting outsourcing businesses in order to get the benefits of cost saving. Outsourcing helps companies to focus on their unique business strategy. It also reduces costs and brings in excellent support staff and expertise on demand. It has been estimated that business-processing outsourcing to small and middle market companies will grow to more than $25 billion by 2009.

More Information: Read Here

Wealthy investors, venture capitalists and private equity firms who are aware are demanding that executives in small and medium sized companies use outsourcing as a strategic tool to put invested dollars to their highest and best use.

Outsourcing of domestic chores

No time for home—that's the situation in which many modern-day families are caught up with. A busy outdoor life takes its toll, and there is the urge to spend the little time left for home in the best possible way. Obviously, this urge cannot include boring daily household chores, such as fetching dry cleaning and prescriptions, waiting at home for the phone technician or delivery person, organizing garages and closets, playing with the dog, shopping for groceries, or cooking the week's meals. Nonetheless, these tasks must be done to keep a household going. So what does the family do? Outsource, of course!

There is an outsourcing answer to almost all domestic tasks. Several small businesses have sprung up to take over all these tasks—you can even outsource the task of cleaning dog droppings from the backyard. All you need to do is pick up the phone, and the task will be attended to in a professional manner. The industry is burgeoning, with  membership in the National Association of Professional Organizers reaching nearly 4,000, and still growing.

It all boils down to the fact that people have limited time left to them, and they want to make the most of it by spending quality time with the family. If this involves outsourcing domestic work and paying for a task well done, so be it.

Mortgage Firm Outsources operations

Mortgage brokerage firm LoanSnap.com has chosen the Worcester-based Lendia Inc. to outsource its back office operations. LoanSnap.com will utilize Lendia’s comprehensive outsource suite (COS) and its human resources to process, underwrite, and close loans, while it focuses on originating loans for first-time home buyers, for investment in properties, and several other varieties of clientele. TMC Net reports:

"We were looking for ways to reduce fixed cost during this rocky origination time and maintain a specific staff level," said Steven Tomaselli, president of LoanSnap.com. "We got references from several lenders regarding Lendia, and more importantly, the company's solutions are flexible, whether volume is up or down."

Granules India first Indian SME to outsource IT services

Now even Indian SMEs have woken up to the benefits of outsourcing. SQL Star International Limited, an IT knowledge and enterprise services unit, has bagged the first strategic outsourcing contract in the Indian SME market segment.

Granules India Ltd, a fully integrated pharmaceutical formulations manufacturer with the world's largest 'granulation' capacity, has entered into an agreement to outsource its entire Information Technology (IT) management to SQL Star. Incidentally, Granules India is itself a provider of outsourced pharmaceutical formulation solution services to large global pharmaceutical firms. Now it is outsourcing its own requirements to another Indian firm. SQL Star's CEO Narendra Shukla told The Economic Times:

We believe that the best of global expertise can be cost effective and made available to the domestic enterprise in India. Mostly organisations do not deploy their better talent for the Indian domestic customers; but SQL Star seeks to change that situation 

Is this a new trend? We have to wait and see!

Small Businesses Increase Offshoring

The growing number of consultants with offshoring experience is growing quickly, allowing companies who do not have the size or resources to devote full time employees for offshoring management the opportunity to get into the game.  As the number of offshoring consultants grow, competition increases and both the services they offer and costs they charge improve.  Silicon.com Reports:

Small businesses are likely to get the same purported benefits from outsourcing as large ones, including low costs, competitive advantage and the ability to focus on core business.

Read More: SME procurement

Discussing the 'Hidden' Costs of Outsourcing

Despite predictions that outsourcing will grow from $8.4 billion in 2004 to $12.2 billion in 2007, Gartner researchers forcast that only 20% of outsourcing projects will save the host company money.  This study is merely one among a wave of recent evidence which points to the now accepted fact that initial predictions about the savings to be had through outsourcing were overstated.  Alex Bona, the report's author, argues that a number of hidden costs, like higher turnover and setup costs dilute the savings of each outsourcing project.  That said, the report indicates that some precautions can be taken to significantly increase the potential for successful projects.  The Register Reports:

Gartner points out that it is possible to save between 25 and 30 per cent if outsourcing is carried out carefully. But badly managed projects can "reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver cost savings."

Read More: Outsourcing more expensive than in-house service

Dealing with the PR of Offshoring

Speaking at an Offshore Customer Management event last week, media communications advisor Liz Barclay recommended that offshoring companies be up front about the fact that they are offshoring jobs and to present the beneficial aspects of why they are doing it.  She argues that too many companies who try to avoid public backlash for offshoring are later caught off guard when the move becomes public.  By contrast, companies should be very up front about the move letting shareholders know about the future profits the company will reap and the increased market competition which requires that they become more competitive.  Silicon.com Reports:

"You can't afford to have untrue stories being reported because you haven't said anything at all.  Take the chance but be absolutely clear, have a watertight case and don't spin it.  If you can't reassure them you won't have their support." she said.

Read More: Offshoring: Ditch the Jargon and Front Up to Customers

Firm Focuses on Small Business Outsourcing

The Toronto-based data management and processing company SwiftThink is offering products designed for small accounting firms, allowing them to increase efficiency and growth.  The move signials part of a larger trend amongst outsourcers, who are beginning to concentrate on smaller firms after years of focusing solely on large corporations.  The Toronto Star Reports:

"The current business model of outsourcing involves developing close relationships with large companies in North America, understanding their needs, and then arranging for a system in India to meet their needs," D'Cruz says. "The basic challenge (of going after small- and medium-sized clients) is how do you amortize the fixed cost? You can't do it over one customer at a time, but you could amortize it over a group of customers."

Read More: Firm bets small business will outsource

Strategies of Outsourcing IT Contracts

Rapidly changing needs require that IT outsourcing contracts are reviewed regularly, not just at the expiration of the term.

According to Computerworld:

"Outsourcing has become an integral part of our IT governance strategy," says Pavan Nigam, CEO of Cendura Corp., a Mountain View, Calif.-based application management firm. "Once you accept that, you realize it needs to be reviewed not on an annual but on a quarterly basis."

"Too often, [an outsourcing contract] becomes shelfware," says Lorrie Scardino, research director at Stamford, Conn.-based Gartner Inc. "I tell clients they should get into the habit of reviewing [their outsourcing strategy] every six months."

Read more: Outsourcing Tuneup

Offshore Outsourcing Benefits Small Businesses

Many small businesses ignore the possibility of outsourcing because of the risks and time involved setting up a beneficial relationship with another firm. But the potential profits may make the risk worthwhile.

The E-commerce Times reports:

"Suresh Balabisegan cites the dot-com crash as the biggest impetus for the growth of companies like DigiBlitz Technologies Inc., the Falls Church outsourcing firm he founded in 2001. As small businesses struggled to survive, more and more turned to outsourcing as a way to save money, he said."

Outsourcing Fuels Small Business Growth

Boston.com reports:

"...there also is measurable local value to outsourcing for many small to mid-size businesses (companies of up to 250 employees). Often for these companies, offshoring is not just an option, but a means of survival in competitive and specialized markets...

"Often there is a net job increase in the United States for these companies, as they leverage their accomplishments abroad to fuel growth of skilled positions domestically in their local markets." Read more

LocalTechWire: "Outsourcing Sales Is Niche for Startup SkyeSource..."

LocalTechWire reports:

"Off-shore outsourcing has gotten a lot of press lately, but technology start-ups in the Triangle frequently outsource an increasing variety of tasks to other regional and local companies.

"For instance, three Triangle companies, FormRouter, Lettermark and Research Triangle Software, have turned to SkyeSource LLC to help speed up getting their products to market.

"Skyesource helps technology companies speed getting their products to market at low cost while also putting some of the nation's 250,000 experienced but unemployed tech sales people back to work, says one of its founders, William Sarine."

Outsourcing a Necessity for Small Businesses to be Competitive

Courtesy of The Miami Herald:

"Small firms, perhaps even more than large corporations, are finding that sending work overseas can mean staying in business.

"Despite fears that offshoring leads to a net loss in U.S. jobs, some small business owners say the cost-cutting move may make local hiring possible.

"'I was going to have to shut my doors, because we weren't making ends meet,' said Enrique Rangel, whose Austin, Texas company, LocalCatering.com, connects caterers with customers in cities from coast to coast, including Denver."