Today, “outsourcing” is not an unfamiliar word. Many companies prefer hiring outsourcing services for improving efficiency. In other words, outsourcing is a popular business practice of hiring a third-party company to handle duties that are beyond the capabilities of the company’s in-house employees. In addition to improving the efficiency of the company, outsourcing services can prove to be a cost-efficient strategy. Let’s find out more about outsourcing strategies and how these are beneficial to your organization.
What Are Outsourcing Strategies?
A company or organization would develop a set of plans for hiring an outsourcing solution that would help in the progress of their company. In another sense, these are a set of plans that describe how a company or organization hires an external partner to perform a particular task or a set of tasks previously performed by the company’s in-house staff. This process of planning is a very crucial phase as it helps to ensure the success of the tasks assigned to the outsourcing company. It The company adopts this plan with the aim to focus on the activities that their in-house resources perform at its best as well as to increase productivity. The organizations or companies that spend ample time strategizing the process of outsourcing would get more benefits, especially when it comes to cost-efficiency and business efficiency.
The outsourcing companies provide different services to their clients according to the needs as well as the business nature of their clients. Let’s check out the important services provided by an outsourcing service.
Types of Outsourcing
When a company or organization searches for an outsourcing service, the primary factor that they would consider is whether the outsourcing firm they are considering would provide the service they are looking for. These third-party companies would provide different services according to the nature of their client’s business to meet their business needs. Let’s find out the types of outsourcing available today for the improvement of the business organizations.
1) IT Outsourcing: In this, the third-party service providers perform tasks related to IT-enabled business processes, app development, infrastructure solutions, software development, maintenance and support and so on. They would perform these tasks irrespective of the size of the company.
2) Professional Outsourcing: There are many solutions offered by the outsourcing services that include accounting, digital marketing, legal, CAD, administration and so on handled by the professionals who are experts in the field. This would help to reduce the burden of the in-house employees as well as help them to concentrate on their own duties that they have expertise in.
3) Business Process Outsourcing: Managing data entry tasks is crucial for increasing the efficiency of the in-house team of the company. Business firms assign this task to business process outsourcing companies. Data entry outsourcing plays a major role in categorizing and digitization of various forms of data which are stored electronically and performing various activities like data formatting, data conversion and data cleansing. Apart from this task, such outsourcing firms perform various tasks including accounting, payroll processing, data entry services, customer support, technical support and so on.
4) Back Office Outsourcing: Apart from office functions, a business firm would have back office functions as well. Though the front office function involves basic business activities of the firm, the back office function is not directly related to the organization’s business activities but is a crucial part for the organization to run smoothly. Some companies assign these tasks to back office outsourcing providers that specialize in managing such activities. Such outsourcing services can help expand their enterprises in the market, irrespective of the size of the firm as it is an important operation of all kinds of firms.
5) Manufacturing Outsourcing: In order to concentrate on the core functions of their business, some companies would assign external agencies to manufacture their products or to assemble them. This would not only help to concentrate on their core duties but also cut the labor costs effectively.
Steps for Building Successful Outsourcing Strategies
1) Outline the objectives of the project
The first and foremost factor to consider before hiring an outsourcing company is the purpose of joining hands with an external agency. You must have a clear idea about what you want to achieve via outsourcing a project before going ahead. In other words, it is crucial to establish objectives regarding your needs and expectations, when you are thinking about hiring a third-party company for handling your business activities. This would eventually help in achieving cost-efficiency as well as business efficiency. On the whole, having clear and defined goals before hiring an external firm is considered the key to success of the assigned project.
2) Evaluate whether the outsourcing is advantageous
It is necessary to evaluate whether outsourcing would be beneficial for the working of your firm or not. For that you should consider the productivity of the internal team by analyzing whether they would complete assigned activities on time or not as well as whether the results they produce would meet the goals of the firm. If they cannot satisfy the needs of the company, then outsourcing is the best option for completing the project.
3) Design project description
After determining whether outsourcing is necessary or not, the next step is to prepare a detailed description of the project by including necessary skills to complete the tasks. These project descriptions would help the third-party team to know what you are expecting from them. You can also provide a list of activities and targets you are expecting to perform by the outsourcing providers by using metrics like production output, cost savings and so on. This would help to develop clear and open communication from the starting point.
4) Set the budget for the project
Setting a budget and other payment terms is crucial before starting the project. In this phase, you should decide whether you are paying the external company based on the production, time worked, or on the basis of projects. In addition to this, it is also important to choose a payment schedule, payment type as well as recipient contact information during this time. However, some companies issue payments based on deadlines. Thus it is important to have a clear idea about your budget as well as the payment method to the external team.
5) Manage the external team
It is important to develop a tracking system to manage the offshore team to ensure that the outsourcing strategy is successful. After tying up with an external team, if you appoint a person as outsourcing manager from your in-house team for managing external teams, it would help to establish communication faster as well as to resolve issues faster. In addition to this, the outsourcing manager and the concerned person from the offshore team would work together as well as track the development of the project in a timely manner.
6) Make a request for proposal
In this stage, the company would send project descriptions to the shortlisted offshore firms and request for proposals. The proposals from the external team would help the companies determine which option is better for them to increase their productivity with cost-efficiency. Sometimes, at this stage, the company might conduct interviews with the management people of the external company in order to make a better understanding whether the assigned team would meet your expectations and goals.
7) Finalizing the outsourcing team
After reviewing the proposals and interviews, the outsourcing manager would finalize an external team that has the potential to meet the goals of your organization. The managers might ask revision to the outsourcing team before finalizing the contract. These conditions would help to streamline all the terms and standardize the process. In addition to this, the company can even use this document as the guideline for future outsourcing contracts.
8) Closely watch the end results
Monitoring the working of the third-party organization is necessary for ensuring whether the offshore service meets your company’s goals and standards. You can even get feedback from your in-house employees to examine whether their productivity has increased after collaborating with the outsourcing team. If the third-party company fails to meet your expectations, the outsourcing manager can convey their concern as well as work together to resolve the issues.
Advantages of Outsourcing Services
The advantages of choosing outsourcing services include:
- Cost-effective
- Would help improve efficiency
- Would enable to focus more on the company’s core competencies
- Better performance of in-house staff
- Helps in-house employees to concentrate more on their primary duties
- Would be more flexible to update processes
- Would help respond aptly to changes happening in the market
- Would increase innovation
- Would save a lot of time
- Better and faster results
Limitations of Outsourcing Services
Though it has many advantages, there are limitations as well. The limitations of assigning business processes to a third-party organization include:
- Risk in terms of security
- Risk in quality of the work
- Risks in terms of hidden charges
Everything has its own potential as well as limitations. Outsourcing services have more advantages than drawbacks. So, it is an ideal option to assign a third-party company for performing particular activities. On the other hand, the above-mentioned limitations can be avoided to a certain extent, if you consider an experienced and expert outsourcing solutions provider at the time of assigning the project.
