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Introduction to Outsourcing
Outsourcing in Small Business


Outsourcing is a practise that is becoming increasingly popular with today's businesses: over 50% of UK businesses currently outsource. With the pressure to become more efficient and competitive, businesses - both small and large - have turned to outsourcing as the solution.


                                             

"businesses must constantly assess

the effectiveness of outsourcing"


However, outsourcing can prove costly to a business if they do not implement the practice effectively. Consequently, businesses must constantly assess the effectiveness of outsourcing contracts and address any issues immediately. To some businesses, outsourcing may be a practice that has so fat been overlooked. However, after reading this it may give a business inspitation for re-thinking how they will operate in the future.


What is Outsourcing?


Outsourcing is the delegation of a business process to an external service provider. The service provider will then be responsible for the day-to-day running and maintenance of the delegated process.

Take the IT giant Microsoft for example - the complete process of manufacturing their products is outsourced to other businesses.

Fees are involved (as you would expect) that will vary depending on the service required.

To optimise efficiency, it is good practise to liaise closely with the service provider on a regular basis. This will prevent issues arising due to the lack of understanding and communication between the two parties.

 

What Isn't Outsourcing?


Outsourcing should not be seen as a short-term solution to a problem or need. To be truly effective, businesses should consider outsourcing as a long-term solution whereby building a continued business relationship with the service provider will offer long-term benefits to your customers.

Outsourcing should also not be seen purely as a cost saving approach - this is not always the case.


What do Businesses Outsource?


Basically, anything that you may consider a business 'process' can be outsourced. Below are a few examples where outsourcing can be introduced:
 
  • Marketing
  • Web design & maintenance
  • Web hosting
  • IT maintenance
  • Manufacturing
  • Accounts
  • Recruitment
  • Switch board (telephone answering)
  • Logistics
  • Distribution (i.e. of newsletters, mail shots)
  • Editing (i.e. of articles, newsletters)
Why Outsource?

There are many reasons why a business may consider outsourcing including:
 
  • The lack of existing skills to complete a process
  • To replace a poor internal service (may not be connected to lack of skills)
  • Resources are not available in-house to complete the process
  • The process is difficult to manage (in general or due to business growth)
  • The process may be performed better/cheaper by other services
  • You require your employees' time elsewhere in the business
  • The process may not contribute to competitive advantage
 
Outsourcing News

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Outsourcing is seen as the next major issue that corporations in the US will be grappling with," Partha Iyengar, vice president for research at Gartner India, a technology research and consulting company, was quoted as saying.

"The faculty are trying to establish themselves as experts, which then typically begets prestige, grants and fame," said Iyengar, who, in addition to conference calls with clients, investment banks and investors, now gets calls from American professors.

Lester Thurow, a former Sloan School dean and one of the class' teachers, was quoted as saying that outsourcing was only a major political issue, but also one of real relevance to MBA students.

"Professional outsourcing creates a world where losses often occur at the top rather than the bottom of the pyramid," Professor Thurow said. "Naturally, our students need the skills to navigate in such a new environment."

At Wharton, the paper says at least 20 faculty members are researching outsourcing. "Increasing numbers of our students -- not students of Indian origin -- are asking to be placed in India," Dean Harker said while on a visit to India last year.

Each week, the Times says,  is overwhelmed with e-mail messages from American universities proposing visits to the company to speak about the phenomenon of outsourcing.

In the last few months, it noted that the Indian Outsourcing Companies has had a dozen visits by students and faculty of top US colleges, and 10 more are scheduled in the coming months. 

Outsourcing is the subject of case studies at Wharton, the Harvard Business School and the Stern School of Business at New York University, is seeing an increase in case study requests from academicians. They have delivered lectures at Stanford, Wharton and Cornell.

At Fordham University in New York, research on outsourcing is thriving. a study that will examine the role of cultural sensitivity in outsourcing, the paper said.

Students are interested in pursuing careers in dynamic economies, Harker said, adding: "India is undoubtedly one of them."

He said India, with their impressive gross domestic product rates, are attractive to students and academicians alike. "Today, every other country in the world is trying to reposition itself to compete with India," he told the Times.

Few have tracked outsourcing more closely than AnnaLee Saxenian, a professor at Berkeley and one of the trend's early researchers. "The speed with which this phenomenon has taken off has amazed me," she said.

In contrast with today, she said, on her first visit to India in 1997, American companies were highly skeptical of the idea of doing business there.

"The rapid acceptance of offshoring of services is viewed by academia as being part of a huge change still in its infancy, with much yet to be discovered."

"Students are eager to learn how this trend will affect employment opportunities, what entrepreneurial openings this may create and what skills are required to succeed in the new world"

 
Outsourcing News

 outsourcing

India's outsourcing industry is growing quickly in a flourishing economy despite threats from developed countries to halt job flight to the developing world.

There are an estimated 300,000 mainly young people working in India's roughly five-year-old outsourcing industry, which is set to grow 50% in 2008 and hit revenues of 9.1 billion dollars, according to an industry study.

A study by the National Association of Software and Service Companies (Nasscom), an industry lobby group, projects business process outsourcing — shifting jobs from countries like the United States or Britain to countries like India - could quadruple to 1.2 million jobs by 2008 and bring in revenues of 21 to 24 billion dollars.

India forecasts a 6.0-6.5% growth rate, considered respectable by many countries.

 
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