As more and more companies are joining the bandwagon of outsourcing, this phenomenon is gaining a lot of corporate and media attention. What used to be a popular trend is fast turning into a norm. The purpose for outsourcing may be unique for every organization, but there are some general reasons that every company does and must consider. Some of them are:
Return on assets: By reducing the not-insignificant investments, profits can improve significantly through outsourcing.
Personnel productivity: By concentrating on the core business, it is possible to enhance the productivity of employees.
Flexibility: The use of a service provider divides the risk and reduces the losses from changing market demands or outdated facilities and equipment.
Labor considerations: Delicate labor union issues of day-to-day can be avoided, though employees need to deal with employee dissatisfaction arising from outsourcing.
Management and Political considerations: Outsourcing eases managing the basic business since the logistics and most distribution problems are dealt with by service providers.
Information technology: The ever-increasing demand for new technologies and resources often can be met more efficiently and economically.
Maturity of the Service providers: In today’s world, an integrated logistics service provider is a dynamic firm, with highly qualified employees and utilizes a winning combination of efficient techniques.
The article also goes through the ten rules of outsourcing. According to Clifford F. Lynch, business consultant and author with more than four decades of industry experience, adherence to these ten basic rules will help nurture a successful and mutually beneficial outsourcing relationship.
Outsourcing Tune up.
By Mary Brandel | Nov 01 '04
Changing needs can make last year's outsourcing strategy obsolete. Ask these 10 questions to keep it on the mark.
Emerging technologies and changing market demands make outsourcing strategies obsolete by the year, sometimes even sooner. Companies that stash away outsourcing contracts intending to pull them out at the end of the term may lose out in today’s severe competition. It is important to review periodically whether the old contract is still fulfilling all the company’s requirements. Some circumstances that should trigger an outsourcing strategy review include mergers, acquisitions, divestitures, changes in the trading community or governmental regulations. Companies should ask themselves these key questions to keep abreast of the market in their outsourcing ventures, says Mary Brandel, a Computerworld contributing writer.
Is the business trying to expand overseas or enhance its global image? Rather than looking at cost cutting alone, this question explores if the parent company wants to do business with offshore countries. In that case, outsourcing to those countries would be a good option to feel the waters and develop a better relationship.
Are new business initiatives likely to overload your IT staff? Rote work such as converting files, expanding fields and translating reports into different languages may overload the staff, and are good areas to consider outsourcing.
Is the company preparing to undertake a critical business objective with a tight deadline? Instead of hiring a whole division of permanent employees, it may sometimes make sense to outsource a new project that is extremely time-sensitive or crucial to gaining new business.
Are there areas of IT that don't interact with other departments or customers? In-house employees add great value when they interact with customers regularly and in critical areas. If there are areas where this relationship is not required, then those may be candidates for outsourcing.
Have outsourcing trends changed? Sometimes options that were unavailable or unsuitable a few years ago may seem more palatable now due to several factor changes. This calls for a rethinking process.
The Evolution of Outsourcing: What to Expect Tomorrow by Dennis Jones, Jack Henry & Associates | Dec 01 '04
Gone are the days when banks used to conduct their business before the lobbies closed at 3:30 in the afternoon. Today’s fast paced world coupled with a demanding market place a premium on 24/7 banking services. Banks that provide round-the-clock availability of services find it more feasible to outsource part of the customer service rather than double the number of employees. Ninety percent of new banks choose to outsource and there is high likelihood of this figure increasing in the long-term. Some of the considerations are:
Focus on Customer Service: Efficiency and ability to deliver sustained quality from a customer service standpoint are critical.
Single Source Provider: Banks are finding it simpler and faster to outsource all the functions to a single provider rather than use multiple vendors.
Vendor Controlled Software: A vendor who has control on the software used is more likely to be chosen than one who is dependent on an outside vendor for any software needs.
Outsourcing Non-Data Processing Functions: In addition to the areas of core and check processing banks are now looking at non-core data processing needs such as bank insurance, disaster recovery, biometric security, cash management, and accounts receivable financing and ways to outsource these functions.
While beginning an outsourcing relationship, banks need to keep long term considerations in mind such as whether a current outsourcing vendor will continue to be able to meet the bank’s strategic needs five to 10 years down the road.
Outsourcing Sparks Returns-Going Offshore Adds to Firms' Bottom Lines.
by Riccardo A. Davis | Jan 03 '05
Come tax season and companies in the US start floundering in a sea of pending jobs and unprocessed returns. This is making lots of US companies look eastward (to be more specific, towards India) to take care of their accounting burdens. This article by Riccardo A. Davis, Associate Editor of Accounting Technology states the example of Daly, Sirianni & Co, a US firm, which has $1.1 million in annual revenue, and employs a staff of 13, including three partners. Last year the company waded uncomfortably through tax season, being short of help to relieve its staff accountants who were dealing with more tax returns than they could handle. This year, the company, though not fully comfortable with outsourcing, is dealing with Xpitax, the Braintree, Mass.-based outsourcing affiliate of accounting firm KAF Financial Group, and will try out their services before an outsourcing contract is finally signed.
The benefits of offshore outsourcing are many and include reduced staffing costs, since chartered accountants in India have far lower billing rates than CPAs in the United States, plus a quicker turnaround due to the time difference. India annually produces thousands of English speaking accounting graduates versed in U.S. tax codes. Security issues in India, though a concern to US firms, are as good as non-existent since the counter measures taken are equally stringent as in the US. Nothing comes without a price and there have been questions regarding ethical issues and as to whether outsourcing actually saves as much money as proponents claim it does.
Outsourcing Issues:The trends in the biotech/pharmaceutical outsourcing industry
By Nishith Srivastava, Business Development Manager, RocSearch Ltd.
Originally Published in CanBiotech BioMed Outsourcing Newsletter: Volume 1, Issue 1, September 2002
Upcoming Pharmaceutical companies, especially ones with very little industry experience have realized that gaining expertise in all the skill sets of the industry is a tough goal to achieve. As flexibility gains more significance within the industry more companies have started focusing on their core competencies and looking for services and functions available for outsourcing such as medical writing. The rising cost pressures are also leading pharmaceutical manufacturers into outsourcing some of their processes to a fast developing contract service industry, fully equipped to handle their needs. According to Nishith Srivastava, outsourcing should be a long-term strategy at the planning stage rather than being a reactive measure to circumstances.
Outsourcing R & D is a concept quickly catching on, the leading R&D units in the pharmaceutical/biotech industry being the CROs (Contract Research Organizations). With sophisticated technologies incorporated into the drug development process, companies seek outsourcing partners who will be able to provide the latest technology and help decrease the time-to-market for quality products. Furthermore, the shift towards individualized health management will create tremendous opportunity for both manufacturers and service providers, thereby enabling them to improve their traditional offerings and exploit entirely new market areas.
Many challenges can impede successful implementation of outsourcing in the pharmaceutical industry. The field inherently involves high risk; only one in 5,000 compounds actually becomes a product, commercial drugs cost $300 million to develop and less than 50% of new products return the development cost. Stringent legal policies also compound this risk. What were the predicted trends in 2002 for the pharmaceutical industry as regards outsourcing? Does the current scenario conform to the predictions?
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