Outsourcing your business process: A critical business decision

Outsourcing one’s business processes is a decision, which should be made only after weighing all the pros and the cons. A move to Outsource could either make or break any business and hence business houses approach the issue with a little trepidation. Before Outsourcing of Business Process, four critical factors should be considered and those are as the following:

1.Benefits:
List down the general benefits that you get out of the Outsourcing arrangement are things like direct cost savings, faster cycle times, higher system availability, etc. One major benefit of Outsourcing of business process could include your ability to charge more for a particular product because of your enhanced competitive position. You may face a little difficulty in quantifying such benefits, but the exercise would be fruitful.

2.Cost:
Here there are two kinds of expenses to be considered. First one has to list all the expenses if the business process were to be handled in-house and secondly the costs, which, would be incurred if you decide to Outsource your business process. Here calculate all the costs relating to the Outsourcing project such as hardware, software, personnel, consulting etc.

3.Flexibility:
In this section one should list down all the indirect benefits, one gets from Outsourcing of business process. One example could be that Outsourcing of Business Process could give you the option to redeploy internal staff to other projects. It’s all about listing the options one gets out of Outsourcing.

4.Risk:
One should identify the key risk factors due to Outsourcing of the business process, quantify their impact on the cost/benefit estimates, and then generate risk- adjusted costs and benefits. Key risk factors include what would happen if the Outsourcer were to go out of business, although a very implausible thought, these kinds of risks are to be considered before getting into a Business Process Outsourcing arrangement.

Outsourcing Business Process is the call of the day

Outsource your Business Process if you want to save costs. More firms are going for Outsourcing their Business Processes because they want to concentrate on their core strengths. Firms are also doing this to not have many people on their payrolls.

Firms Outsource their Business Processes like finance, bookkeeping, web designing, and other Back-Office Operations. Almost 50% of multinationals have come to counties like India, and China etc to Outsource their Business Processes, to minimize their costs and become more competitive.

Countries like India etc are favorite destinations for Outsourcing of Business Processes for multinationals because here, they get cheap, educated staff, who are quick learners are adapt at performing multi-tasks

Hughes ready to Outsource Business Process to third parties

Its just been a year since Hughes Software Systems launched its Business Process Outsourcing Services for group companies abroad, it is now open to offering its services to third parties also. Hughes is looking for Business Process Outsourcing opportunities in UK and US. It was only during the last financial year, that it set up its Business Process Outsourcing Services division, in Gurgaon, on the outskirts of Delhi.

At the moment the Business Process Outsourcing Services division of Hughes employs 300 people, but it could go up very quickly, as it is expecting to get some new business. Business Process Outsourcing Services division of Hughes provides online customer care support-using voice, chat and e-mail across multiple industry segments including IT and networking, telecom, automotive, insurance, banking and financial services.

The benefits of Business Process Outsourcing are many, but one of the main benefits is cost-benefits. It actually helps companies channelize the amounts saved into other important activities.

Quite a few supporters for India in the Outsourcing Business Process arena

India has gathered quite a few supporters in the global market who swear that India is the best for Outsourcing Business Process. Like UK-based LogicaCMG, which says that, “India is the best among the so-called low-cost destinations for Outsourcing Business Process. Moreover, it is the fastest growing Outsourcing centers for Business Process”. The vociferous support for India as the preferred Outsourcing destination comes in the wake of a backlash from Indiana State against the American subsidiary of TCS in the US.

In the wake of so much political ill will against the very idea of Outsourcing Business Process, how does LogicaCMG manage to be so forthright about their ever-increasing Outsource activities in India? "It is a fine balancing act. They have done a smart thing, which ought to be appreciated. They actually haven’t really moved jobs to India, but created new jobs in India.

Outsourcing Business Process has contributed 19% of the company’s turnover now and they plan to increase this 30% by 2005. LogicaCMG has around 11 clients in the country, one most recent client being the RBI.

Hopes pinned on Outsourcing Business Processes sector

If the year 2003 was the year of protests, strikes, bickering, and backlash against Business Process Outsourcing, Indian firms have reason to feel confident to ride through the year 2004. It is for sure that 2004, being the election year, there will a lot of noises raised against the Business Process Outsourcing, but analysts believe that business will not be affected.

The great news for Indian firms though is that 60% of the top 1000 firms in US have started their groundwork regarding the cost advantages of doing Outsourcing Business Processes from India. Although recently there have been lots of talks about China and Malaysia coming up the ranks as an Outsourcing destination, India is the reigning champion in being an Outsourcing Business Processes destination. Data entry and voice customer service may be the cash ringers presently, but the growth will come when we will move up the value chain.

Outsourcing Business Processes is still at the nascent stage and there is lots of market to be tapped. So it is believed that 2004, will be equally good, if not better than 2003.

Outsourcing Busines Processes: The latest trend.

Outsourcing business processes is the latest fad to hit the multinationals. Almost 35% of the 500 fortune companies Outsource Business Processes from low cost countries like India, China etc.

Outsourcing Business Processes saves a lot of costs for the big firms and apart from that it helps them focus on their core processes. Firms open up their Call Centers through which they serve clients worldwide. Callers abroad dial a toll free number, and they get connected to a Call Center in India. Businesses Processes that are Outsourced include financial services, debt Collections and a host of other processes can be Outsourced

Outsourcing, not only for the big players anymore

Till now there was a visible trend that only the larger and financially strong companies were Outsourcing business processes to countries like India etc. But now even the small and mid-sized firms are gearing up for Outsourcing.

In 2004, India can look forward to get more Outsourcing deals, as the number of firms looking to Outsource will increase tremendously. There is going to be a drastic change, which will see even the smaller players taking a plunge into the ocean of Outsourcing. They are going to change the general outlook that, Outsourcing is only for the Big shots.

While three quarters of small and medium-sized firms do not currently Outsource any functions, less than half do not expect to do any in the future. Nearly a third expect to be doing more Outsourcing in 12 months than they are now, according to a study by research group KPMG. The top locations that companies are considering to Outsource from are Eastern Europe (19 per cent), China (18 per cent) and India (17 per cent).

While Outsourcing is still going to be the most attractive option for the bigger players running major Call Centers and administrative functions, small players though are not going to be left behind.

The backlash against Outsourcing could cost U.S a bomb

The backlash in the U.S. against Outsourcing to India could backfire. If US didn’t ease up immigration rules, and modify the visa rules and resort to steps like Outsourcing, US economy could lose up to $2 trillion worth of growth opportunities due to a massive labor shortage by 2010. These are very serious problems, which US needs to address immediately; otherwise it could find itself in a soup.

US is about to face a serious labor shortage of 5.6 million in the US by 2010, mainly In the areas of technical expertise. Both these problems could be solved through immigration of around 3.5 million workers and Outsourcing to the tune of 1.3 million jobs. Out of 1.3 million Outsourced jobs, almost 50% of these opportunities will come India’s way. These Outsourcing opportunities are sure to come to India, because of India’s advantage in certain areas, low labor costs, low operational costs, advantageous time zone, 24/7 service, vast pool of English speaking workforce, computer savvy, highly qualified staff, on-time delivery and high quality work.

Rationally speaking, Outsourcing keeps the U.S. companies competitive and let’s them concentrate on their core processes. According to a recent report $100 of Call-Center work Outsourced by US firms, $143 is invested back into the US economy in the form of repatriated profits, increased sales of telecom equipment and cost-savings.

US have to Outsource to fill this gap, cause they have no other option. It will be a grave mistake by US, to let the backlash to flourish. They have to stem it before it grows too much and ruins the US economy.

Outsourcing is outpouring

More and more Outsourcing opportunities are coming India’s way. Now the software giant, Cisco is looking to Outsource its requirements in development to Indian software companies, instead of hiring engineers globally. This move further stamps India’s growing stature globally.

What is so pleasing about this move by Cisco, is that India is the only country where Cisco Outsources development related work to. The company already Outsources its software and product development requirements to Infosys Technologies, Wipro and HCL Technologies and has mandated them to hire more for Cisco’s development work. Now with this decision, more work would be Outsourced to Indian companies.

Not only that, Cisco, the world’s leading networking technology company, has also decided to Outsource the company’s internal Business Process Outsourcing (BPO) operations to Indian companies. The company Outsources its BPO requirement to Progeon, the BPO subsidiary of Infosys Technologies.

Make hay while BPO shines

Business Process Outsourcing could be India's crowning glory and India could well win the title of being the best back-office. Every country has been fighting to have a piece of the Outsourcing cake. And the battle has been keenly fought with just one key factor advantage: fluent English speakers. New kids on the block China and Philippines are trying hard to match up the gift of the gab that the Indians are so blessed with.

Almost conspicuously India has fast become the haven for Outsourcing. It has generated this feeling around that if a multinational wants to go global, it has to have a presence in India. And now that the heavy load of income tax has been removed from the chest of the Outsourcing players, they can breathe a sigh of relief. With this move India is surely moving towards becoming a tax heaven. This could lead to more earnings, which could well mean more investments in quality: robust training facilities, global-class infrastructure, and top-notch talent. And talent would translate into higher salaries, as BPOs start differentiating on the basis of customer delight.

At the center of all the Outsourcing hustle-bustle is India at the moment, sinking in the feeling of being at the top of the Outsourcing ladder. It could well stay up there as long as it wants, given that it maintains it competitive edge of being low-cost, having highly talented English speaking professionals, providing a top-notch quality of work on time and a 24/7 delivery promise. All these along with the more recent tax-reforms can make India an Outsourcing super giant whom nobody would dare to disturb in a hurry.

Highlight of the year 2003: Outsourcing

No doubt in anybody's mind about the topic, which hogged the limelight throughout the year: Outsourcing. It has been the most significant trend in the world in the year 2003. And the destination, which is the leading the pack and termed as the king of outsourcing, has been India. The sector has witnessed a phenomenal annual growth rate of around 60-70%, and includes various services like customer care, content development, payment and administrative services and healthcare.

One of the primary reasons why U.S. companies throng to India is the kind of cost cutting they have been able to do. And the figures are not something that you can overlook. In fact U.S. companies have been able to save around $16 million by outsourcing to India. Obviously the tremendous savings have enabled the U.S. firms to completely restructure and become more competitive in the process. Outsourcing of so many jobs has suddenly created a new career choice for the youngsters. It has created more than a million openings in processes like voice based, non-voice based, and technical services etc. Outsourcing has also led to an unprecedented expansion in technology exports which now account for 3 per cent of India's GDP.

But on one hand where outsourcing has smiles to Indian faces, it hasn't pleased the unions in U.S. and U.K. one bit. There has been retaliatory action in the U.S. and has angered the worker community. Politicians have been asking firms as to why the jobs are being outsourced overseas, when U.S. has skilled people here in U.S. who are being forced to sit unemployed. The states of New Jersey, Michigan and Indiana have tried to enact legislation banning outsourcing. But the reactions in the US corporate community have been sharp, who have said that, "If the workers here are willing to work at prices that the Indian workers are, then they have no problem. But if not, then they can't help."

All these strikes, outrage and protests may buck the trend of outstanding growth of outsourcing in 2004 --- unless costs remain low and services improve with the induction of better educated 'knowledge workers' who also possess the right American accent.

Govt. getting ready to sell BPO as a career

Pretty soon your television sets are going to be bombarded by ads by the govt. professing Business Process Outsourcing as a good career choice. Pretty soon these ads about BPO as a lucrative career choice will start getting aired on the television.

This move has been taken with one thing in mind, that there should be no shortage of qualified manpower at any stage, because figures by NASSCOM quote that the Indian business process outsourcing will generate a mind-boggling 1.1 million jobs by 2008, against 170,000 now.

One of the reasons for planning such a communication is that people don't see business process outsourcing as a long-term career, and that is one image that the government would want to change. The proposed campaign will cover a whole range of activities including advertisements, road shows and seminars etc.

The campaign intends to glorify the employment opportunities and the growth prospects in the business process outsourcing sector and promote it as a career choice. It would also try and hard sell in smaller towns and rural areas because those are the areas where people are completely ignorant of the job openings and will try and create awareness about this in such remote areas. There is also some talk about including business process outsourcing in school and college curriculum, which might influence the student in taking BPO as a career.

India getting much bigger than just being a call center outlet

All the industry giants have recognized intelligence of the Indian brains worldwide. It is becoming much more than being a data entry or call center location. Multinationals are in fact trusting India with complicated processes. Like the most recent example, the Sun Microsytems has decided to outsource a part of its process to Indian software companies.

The $18.3 billion information technology giant is the first one to outsource product development work of such magnitude. The project consists of outsourcing of large products related work. What this huge project will do is emphasize the superiority of India as a center, which is much capable than just being verbally fluent. And it might influence other firms to outsource major work to Indian firms, which will in turn generate more revenue and add to the brand called India.