Saturday, March 10, 2007

Business Process Outsourcing Pros and Cons

Philippines/ Manila - If you are looking for a partner to outsource services for the business you have, what would you consider as the first basis of choosing your partner? Would it be english proficiency? Would it be for the cost? Would it be for the security of the venue? Would it be because you want to save your business from near bankruptcy? Would it be for data security? Or would it be because outsourcing simply has most of its aspect contributing to a total business growth and convenience?

image from the webpage

I say all of the above plus my own set of guidelines, aspects and standard ways to follow in growing my business through outsourcing। Of course doing a market research is the best and the first step to do any business. Shifting from one venue to another by offshoring services leaves you to first consider before anything else the basics and elements you need to know about outsourcing a business. Include all possibilities of your research from venues, policies, company track records, type of clients, do’s and don’ts , communication aspects, human resources, etc and mostly about the service provider you are planning to outsource your services to.

English Proficiency:

Choosing your partner offshore especially in outsourcing services for your business, must first comply through a test if communication aspect in terms of English proficiency is at a considerable status.This is because in any business, communication is the most important in improving relations with human resources (workforce) and clients plus proper management of company liabilities. It is also a common knowledge that for any business to grow, communication rate through a common medium is both a necessity and a basic need at the same time.


By cost here i mean is not just to save on company expenses but also of providing your business the best service through a cost-efficient choice in offshoring the outsourcing needs for your company. Take note that going for a cost-efficient service is very different from cutting company expenditures per se. There is no need to actually cut expenditures and make your other resources suffer in the long run, instead you can resort for the newest cutting edge trend in the IT business community - “outsourcing” or “offshore outsourcing“.
This the most critical part in the Outsourcing Industry today because lately, many outsourcing venues have suffered different degrees of backlashes like India for example in ” The HSBC Outsourcing Center Fraud “. Although these happenings have greatly affected the industry, many would still prefer to outsource services because of the great pressures in cutting costs of their business. Since security is the most talk of the town topic of debates in most businesses, as saying that it poses a great threat to let endo-resources or third party handle company data which makes it very vulnerable security wise. Others say that the same thing happens elsewhere in the world after all. That includes the United States (where a vast source of outsourcing clients come from), so there is really no big deal in coping up with security problems when it comes to ” offshore outsourcing “. Everybody knows the risks, so all they can do is to put up measures to prevent such occurrences, be prepared and that’s it.

Direct Communication with Client:

Direct communication with the client is eliminated in outsourcing, therefore, you should provide yourself some measures to maintain and maximize efforts to monitor the transactions and data of your consumers through your own unique process. Whatever you resort to is all up to you. After all, through outsourcing, you get the advantage of drawing large amounts of your resources and attention for the use of the more important issues within your company to avoid dissatisfaction on both sides and build solid relationships with your customers or clients.
Aside from the deletion of direct communication, a delay in such aspect is mostly to be resolved also. This could lead to delays in project implementation and the growth and extension progress of your company may suffer as well. This causes you to be very dependent on your outsource service provider which you would not like because of possible drawbacks. This is in cases where the outsource service provider backs out its service to you and leaves you to wander in the abyss leading to an even bigger problem of finding another in a rush.

Level of Performance:

Outsourcing is based on fundamental principles like any other ways and means in any business and if these principles are correctly and smoothly applied in building a relationship along the process, the two parties involved will most likely have a harmonious, effective and successful duo. This is one of the keys for a contract in outsourcing to materialize, otherwise, dissatisfaction may result to an early termination of any agreement.
Scope of service - The outsourcing party should determine and make a clear set of guidelines that they expect to be performed by the third party or by the outsource service provider. This is the only way for the first to achieve a comfortable level in the process of turning over the specifics, materials, documents, data, records, goods, informations and the like and at the same time for the other party to make a clear vision of the scope of work expected of them and make sure that the first gets whatever he pays for. This will also be a reference point, accountability wise in the part of the service provider and take note should be done up-front prior to signing any contract or agreement.
It has been a common mistake for most business owners to compromise and let the outsource service provider dictate the tempo of which way their business is going including the level of performance and specific service rendered or needed by their company. This leads to the formulation of service limitations.

Service Limitations:

Boundaries with respect to specific components of service are to be set solely and determined by the outsourcing party or business owner to avoid unnecessary charges not agreed upon by the two parties involved. Take for example accounting matters which involves a certain aspect of service including payroll, expenditures, overhead expenses, numerical values etc. “Remember to be specific at all times to avoid miscommunication lapses”.

Deals and Contracts:

Long term relationships are only achieved if both parties are able to present each other in full effort a flexible deal with which to lessen the risks if not to eliminate on having to assert automatic reserves regarding small differences in terms of service of the third party and in terms of payment on the other.
These terms of payment is all about putting up extra considerations like incentives to encourage the outsource service provider to renew an agreement. According to researches by InfoServer - “There is a remarkable tendency for companies to start to chafe at their outsourcing relationships at about the second year; this is often when contract adjustments are needed. This “two-year itch” phenomenon is another reason why a three-year contract makes sense. An adjustment process can take three to six months and, if the supplier isn’t willing to work with the buyer, they’re not far from being able to go out to market. That implied threat of going out to the market puts the buyer in a strong position to make sure that there will be fair and equitable negotiations”.

Flexibility vs. Long-term Relationship:

Since by its very nature, outsourcing has two parties involved, therefore, expect two colliding forces to cope up with unexpected changes on both side and hopefully take the same path through considerate measures to integrate and go the same direction in the long run to promote each others interests either way in harmony. This is of course by way of developing harmoniously compatible relationship for a long period of time and in return flourishing in each other’s field without having to compromise the flexibility of their formed agreement or contract.
Although a long term relationship is inherently inflexible in the outsourcing industry, for the reason that we all don’t have the ability to exactly predict the future, it will be flexibility itself that will have to deal with the unexpected changes.

Develop Long-term Relationships but Short-term Contracts:

Long-term relationships are never out of date in the outsourcing industry, but short term contracts are looked up to being developed. Why? Simply because in the IT outsourcing industry for example, we all know that the status of computers where the rate of development and change in terms of speed is incredibly very fast. It would therefore be very ridiculous to develop a long term contract ( say, a ten-year ) outsourcing services for the sale of such product if no one knows what the desktop may look like in a year or two. The outsourcing party therefore needs to structure and forge a contract that would be very virtually possible and realistic in nature. A long term master contract for a relationship ranging up to ten years if possible must therefore be achieved to attain flexibility ( in the supplier’s interest ) but open to adjustments to the short-term service agreements underneath it as necessary ( in the outsourcer’s interest ) and lastly, put added incentives along the line ( for both party’s interests ).

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