Disadvantages of Outsourcing

Outsourcing has many benefits:
* Renewed focus on core business.
* Mitigation of risks by reliance on an expert.
* Improved customer satisfaction through improved processes not part of the enterprise's culture or experience.
* Ability to reward workers with career opportunities in a specialty company.
* Project improvement.
* Service improvements.
* Skills upgrade.
* Skills retention.
* Skills access.
* Technology infusion.
* Cost accounting and overall visibility of accounting and performance in a business process.
* Cost reduction.
* Management of volatility in costs through financial engineering.
* Asset conversion.
* Avoidance of capital investment.
But what are the disadvantages of outsourcing? You'll find a a list of over 25 cons in the Outsourcing Forum of 12manage.

Tapan Mukerji's World

Engineering Outsourcing

Generally, outsourcing most of the times tends to be related to cost saving. Well, this may be one part of the story but not the single driver. Basically, one goes to outsource when it is not possible to accomplish the same way in-house. So this may be cost, technology, time lines or whatever.

With our experience of handling various projects from offshore, we have seen engineering outsourcing is also interpreted most of the times as drafting assignments. Equally untrue is this interpretation!

There are many areas like design, analysis, project management where the customer simply may not have the expertise. Recently, we did a finite element analysis of a complicated configuration for a large manufacturing US organization. It is interesting to note that the organization had been manufacturing the same product for 20 years but when it came to performing a finite element analysis, they had to outsource offshore.

In this case demand for technology prevailed over everything else. So offshore companies are not solely meant for labor intensive functions - many of them have highly specialized technology skill to offer.

Offshoring IT Services: A book review

The book titled "Offshoring IT Services", by Mohan Babu K, published by Tata McGraw-Hill is a must read if you want to update yourself on the current trends in the field, and also learn some valuable basic concepts of IT offshoring and IT projects.

The author, an experienced IT professional, who has a project management certification, has included his real life work experiences to serve as example in many instances. Which makes it easier to visualize the issue being discussed and understand its real life picture. The " Case Point" section in the chapters are an interesting read, they serve as case studies in nut shell. The diagrams and illustrations are well placed and serve their purpose.

The book has depth and while reading it you can see that it is a well-reserached book. I suggest that the author market is as a text book, as there are few books on offshoring and outsourcing which are written to serve as text books.

On the shortcomings of the book, I have listed them below:

# on page 19, the speaker is introduced not in the same page but at the end of the chapter.

# for chapter 3, Framework for Managing Global IT Projects,adding about the concept of" 24 hour knowledge factory" would add to the depth of the matter being presented.

# chapter 4, Offshoring:The IT management Context,instead of presenting IT management as "project management", I would suggest to include other management aspects too.


# Offshoring models, which appears as an Appendix, would be better placed as a chapter by itself with more discussion and material.
Also there needs to be more discussion on emerging markets around the world

As a student of outsourcing, I would say the book has added to my knowledge and sometimes made me realize that I need to do more reading(as some new developments mentioned in book caught me off guard).

Go and get the book, if you are serious about outsourcing. But if you are into outsourcing just to make sense out of Lou Dobbs, I don't think this is the right one for you.

Bhumika Ghimire,2006

Reasons for Offshoring changing

Increasingly, companies no longer perceive offshoring as a way of cost cutting only, but also as a growth strategy. Recent results of an ongoing survey by the Offshoring Research Inititiative finds the following list of reasons for offshoring:

• Cost reduction (97%)
• Growth strategy (73%)
• Competitive pressure (71%)
• Access to qualified personnel (70%)
• Industry practice (52%)
• Improved levels of service (50%)
• Business process redesign (48%)
• Changing the rules of the game (37%)
• Increased speed to market (35%)
• System redundancy (33%)
• Access to new markets (25%)

The goal of the research is to objectively benchmark key performance metrics and the current perceptions of financial, operational and political risk associated with the five leading Offshore operational models.

Need Volunteers

Hi all,

I need some volunteer writers to write on outsourcing for an online learning site run by a group of volunteers.Please contact me at bhumika_g@yahoo.com.

Thank you
Bhumika

Discussion On Outsourcing Education

I want to discuss about outsourcing as a field of research and as a course taught in Universities.Anyone having information please join the discussion.Also what do you feel about the outsourcing professional certification program by the International Society of Outsourcing Professionals..?

Looking for new outsourcing destinations

As we know India and China are the preferred outsourcing destinations at the present. But then the rising costs in India and legal problems in China has forced us to find new dsetinations for outsourcing.Poland is coming up in Eastern European region, then there is Russia and former Yugoslavia.In the Asian region, I believe Nepal, Sri Lanka would be a great destinations because of the lower costs, sizeable English speaking population and availability of trained manpower.Although the talent pool is not comparable to India and China, Nepal and Srilanka can be a good option for small scale projects.

Nepal has problems with infrastructure and stability.Recently the King took over the government and shut down internet access for couple of days, even mobile phones were down.Then there is the Maoist insurgency which has forced many international projects to leave the country.Sri Lanka has the issue of Tamil insurgency.

What I am trying to get here is, to start a discussion on new outsourcing destination, outside the obvious.

Newer Areas for offshore outsourcing:2006

Is 2006 going to unfold newer areas of outsourcing?
Clinical Process Outsourcing probably could be one of the areas that might emerge out with simplification of health care legislations. If carefully handled, the world should witness the dream come true - a more efficient health care delivery system. The most critical part will be the selection of the offshore providers and correctly assessing the expertise level. The criteria for selection would be a tougher process and for performing that correctly the decision makers should thoroughly acquaint themselves with the medical education system prevailing in the target countries.

In fact the standard of medical education in some of the institutions in India, for example, is highly comparable with what is known as best in the world. It will be misleading to comment on the standard of medical education on the basis of the current scenario of health care delivery system as exists in those target countries. These are two different issues, the latter being an intrinsic function of socio-political parameters.

Call centre outsourcing does not work, says Gartner

"Many customer service call centres that have been outsourced to third-party suppliers are under-performing", according to a new report by analyst firm Gartner.

Of the organisations that outsource their customer service and call centres - including the IT systems - 80% will fail to achieve their targets for costs savings.

In addition, 60% of organisations that outsource parts of their customer-facing processes over the next three years will see customers switch to rivals and find hidden costs that outweigh any potential savings they derive from outsourcing.

According to Gartner, successful outsourcing can achieve cost savings of between 25% to 30%. However, poorly managed outsourcing deals can reduce the quality of the customer experience, dilute the brand values of the company and fail to deliver cost savings.

Most companies fail to manage the customer service experience sufficiently and often lock the organisation into long-term outsourcing contracts without conducting appropriate pilot testing.

To ensure successful customer service outsourcing, Gartner recommends that companies create customer-facing processes. It said businesses should judge the supplier based on customer satisfaction or other quality metrics to measure and motivate outsourcers, rather than "operational metrics" such as the number of calls handled by the supplier.

Users should also not underestimate the management time required to make an outsourcing relationship or contract work. The analyst firm has predicted that the worldwide market for customer service outsourcing is set to grow from £4.4bn in 2004 to £6.4bn in 2007.

Multi-process HR outsourcing growing quickly

The outsourcing of three or more HR functions, commonly referred to as Human Resources Outsourcing (HRO), grew by 37 percent in 2004, according to an in-depth study issued today by the Everest Research Institute. The report, Human Resources Outsourcing (HRO) Annual Report 2005, also found cost savings accelerating for buyers, both large and small, and the scale of HRO engagements increasing, as global deals become increasingly common.

Key findings of the report are:

-- Buyers - Prices across all segments have fallen over the last 4 to 5 years by more than 20 percent as the market has matured, with prices for larger buyers (in excess of 25,000 active employees) falling faster than those for small buyers (with fewer than 25,000 active employees). However, the number of small buyer transactions has recently crossed that of large buyers, and this segment will see further price reductions as the market continues to scale and the delivery model matures. While the offshore component has not been much of a driver in HR outsourcing, its impact could accelerate in the future.

-- Suppliers - Major revenue opportunities for suppliers still abound. These include the small buyer segment, less mature markets such as Europe and Asia, and larger global transactions. Effectively penetrating each of these markets, however, will require a different set of skills and technologies. Meeting the needs of the small buyer segment, for example, will require that suppliers effectively leverage a single technology platform to work for a number of smaller customers.

-- Investors - Increased merger and acquisition activity is likely as suppliers seek partners with complementary capabilities and large suppliers without capabilities buy into the market. The European and Asian HR outsourcing markets are far less developed than North America, and new VC-funded initiatives could arise in these locations if established suppliers do not make investments. At the same time, the window for organic new supplier entry is rapidly closing, and established suppliers will have an advantage going forward. Visit Everest website.