WHY OUTSOURCE
The business structure and function of America and Europe has become too fast paced to be ably handled by a single body. Most of the pertinent attempts only lead to instabilisation of the entire structure. You simply cannot keep on stacking up cards above without adding more at the bottom. Small industries or giants have all resorted to some sort of support or the other commonly termed as Outsourcing.And boy! What a discovery. Outsourcing , the magic act, can suddenly make your company more responsive to costs, provide better value to your customers and partners, improve your business by sharper focus on the core issues, enhance efficiency and ..Wow!
Systematic Attempt at: REASONS FOR OUTSOURCING
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A>. LACK OF EXPERTISE:
1. You have to outsource if you don't have the rightly skilled professionals.
2. Leverage the provider's extensive investments in technology, methodologies and people
B.> CAPITAL:
1. Conservation: Reduce overheads, free up resources, the money can be applied to develop the Core business rather on overheads such as computers, desks etc.
2. Cost Effective: No HR recruiting, training, solution providing.
3. Cheap: Excellent HR resources for almost 1/4th the US salary.
4. Reduced operating costs.
5. Reduction of financial risk: as investment shared.
C.> MANAGEMENT
1. Sharper focus on core business
2. Improved efficiency
3. Better concentration on strategic thinking, process developing
4. Increasing customer satisfaction
5. Reduce the risk of technological obsolescence and increase efficiency by consolidating and centralizing functions
6. Reduce the overall head ache and develop market presence tension free.
7. Obtain needed project management and implementation consulting expertise, along with access to best practices and proven methodologies
D.> GOOD BUSINESS SENSE
1. Availability of world best services at half the cost.
2. Save the ever critical time
3. Get access to specialized professionals and skills
4. Great flexibility: it is much easier to cancel a contract than fire personal employees.
5. Avoid the cost of starting from scratch and gain from the experience of custom built outsourcing solutions available.
E.> EDGE OVER COMPETITION
1. Provide value added service
2. Provide better, specialized, customized and dedicated customer service
3. Increase customer satisfaction
4. Keep pace with the rapidly changing business modules
5. Be reliable and innovative
6. Shedding of HR or IT burden helps you do better in core business.
F.> TOWARDS GLOBALISATION
1. Reduce your marketing and software delivery costs
2. Gain access to global buyer base needing software development
3. Manage your projects online with buyer participation
4. Neutral marketplace with global choices
5. Economies of 24 hour X 7 days a week low-cost software development with access to global consulting firms. For instance, Advanced communication technology has allowed global software teams to become commonplace. Some software companies are organizing global software teams to employ the best talent in the world.
BORROWED NOTES
[what other sites report as reasons for outsourcing)
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SURVEY RESULTS:
A. survey conducted by DataQuest on the Reasons for Outsourcing:
Acquire technology skills ------ 49%
Gain industry expertise ------ 48%
Increase application expertise - 38%
Add flexibility/reliability ---- 25%
Improve IT performance - 22%
Improve competitive position --- 13%
Link IT and business strategy -- 12%
Share risk ----- 10%
Reduce costs --- 10%
Note: Numbers don't add to 100% because multiple responses were allowed.
Data: Dataquest survey of 250 IS executives. Source: Information Week
B.
Collins and R. Millen published the results of an outsourcing survey.13 Based on responses to the survey, they deduced the following reasons, in descending order of importance, for outsourcing information systems:
[courtesy: white paper - outsourcing information technology by General Services Admin, 1998]
*Focus in-house resources on core functions
*Personnel cost savings
*Improved quality of information systems services
*Increased flexibility
*Increased access to new technology
*Provide alternatives to in-house costs
*Stabilize information systems costs
*Technology cost savings
*Re-engineer process
*Reduce technological obsolescence risk.
TOP 5 REASONS FOR OUTSOURCING*** -- by Joe Bonhage
1. Lazy or mediocre employees who don't want to work hard, but complain they don't get paid enough.
2. Taxes that overburden businesses
3. Worker's comp laws
4. Overseas workers that are all too happy to make a little extra pay, with increased productivity to boot.
5. Too many restrictions on doing business in home country.
Reasons for outsourcing by -
TOP FIVE STRATEGIC REASONS FOR OUTSOURCING
Improve Business Focus :-
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Outsourcing allows companies to focus on broader business issues while having operational details assumed by an outside expert. For many companies, the single most compelling reason for outsourcing is that several of the “how” type issues are siphoning off huge amounts of resources and attention from management.
Gain Access to World-Class Capabilities :-
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By the very nature of their specialization, outsourcing providers bring extensive world-class resources to meeting the needs of their customers. Partnering with an organization with world-class capabilities can offer access to new technology, tools and techniques that the organization may not currently possess; more structured methodologies, procedures and documentation; and a competitive advantage through expanded skills.
Accelerate Reengineering Benefits :-
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Outsourcing is often a by-product of another powerful management tool; business process reengineering. It allows an organization to immediately realize the anticipated benefits of reengineering by having an outside organization – one that is already reengineered to world-class standards/process
Share Risks :-
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There are tremendous risks associated with the investments an organization makes in information technology. When companies outsource they become more flexible, more dynamic and better able to change themselves to meet changing opportunities.
Redirect IS Resources to more Strategic Activities :-
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Every organization has limits on the resources available to it. Outsourcing permits the redirection of resources from non-core activities toward activities that provide a greater return in serving the customer.
TOP FIVE TACTICAL REASONS FOR OUTSOURCING
One time applications :-
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Applications that need to be developed or modified for a specified time require high manpower resources at one point of time. For this the organizations need to ramp up/ramp down in a relatively short notice. This in-turn is expensive. For this outsourcing is the best solution. For e.g. Y2k, Euro, porting from one-platform to another etc.
Reduce or Control Operating Costs :-
---------------------------------- The single most important tactical reason for outsourcing is to reduce or control operating costs. Access to an outside provider’s lower cost structure is one of the most compelling short-term benefits of outsourcing. In a recent outsourcing Institute survey, companies reported that on average they saw a 9% reduction in costs through outsourcing.
Make Capital Funds Available :-
------------------------------ Outsourcing reduces the need to invest capital funds in non-core business functions. This makes capital funds more available for core areas. Outsourcing can also improve certain financial measurements by eliminating the need to show return on equity from capital investments in non-core areas.
Generate a Cash Infusion :-
--------------------------- Outsourcing can involve the transfer of assets from the customer to the provider. Equipment, facilities, vehicles and licenses used in current operations all have a value and are, in effect, sold to the provider as part of the transaction, resulting in a cash infusion
Secure Resources not available internally :-
------------------------------------------- Companies outsource because they do not have access to the required resources within the organization. For example, if an organization is expanding its operations, especially into a new geography, outsourcing is a viable and important alternative to building the needed capability from the ground up.
IN CONCLUSION
Global giants such as IBM, Microsoft, Novell, Oracle, AT&T, Fujitsu, Motorola, Digital, Hewlett-Packard Philips, General Electric, IBM, Reebok, Fujitsu, British Aerospace, General Motors and Sears are keeping ahead of their rivals thanks to the competitive advantage conferred on them by some of the best software companies in India. You too can benefit immensely from a successful outsourcing strategy.
posted by OrangeClicks @ 6:39 AM
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