Outsourcing

Outsourcing- can be defined as the practice of getting the work done from outside firms which are normally performed within the company. This concept is getting popular among most of the entrepreneurs. The outsourcing may include even the routine tasks such as like payroll processing, accounting etc. often because they can save the resources on these and use them in a better way. Many large companies turn to outsourcing to cut costs. In response, there an entire fleet of industries have evolved to cater the needs of companies who have no other option but to outsource.

But in the race for outsourcing most of the companies do not understand thoroughly the benefits and targets they can achieve through outsourcing. Although it is true that cutting the costs is the most prominent reasons for outsourcing, but it is not the only one. The outsourcing mania is believed to begin in 1990’s. No matter outsourcing is beneficial but in a subtle amount. Even too much outsourcing is not good for the health of the business. There remains a need to have a wise attitude and thinking for identifying which components to outsource in order to have a long term benefits. The following points must be considered for the getting appropriate results from outsourcing:

Reducing the capital costs: Cost has not been the only reasons to get the work done by outsourcing but it is certainly one of the major factors in pushing the firms to get the work outsourced. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business.

Improving the quality: Companies which tend to do the work all by themselves are having a major flaw as to pass the cost incurred on the research and development on to the customer. Else it has been observed that it is better to get the work done from the specialized firm giving it only the requirements and getting the output and that too at a specified cost.
Removing hassles: The hiring and training the labor for the short term work or peripheral projects tend to get too expensive as such there comes the need for putting all Outsourcing lets you focus at the domain where you expertise.

Improving throughput: A company which identifies the components it can outsource and utilize in a better way can improve the efficiency in getting the work done that too at a better pace. It can get the resources instantly and start with its work at any time required. This is extremely useful as the company can save a lot in getting the work done easily from a specialist than wasting months developing it in house.

Focused at the core: Every business needs to remain focused on its core to have a better productivity and overall quality in the product development. The outsourcing process helps the business to focus on the main concern and not divert their attention on the peripherals.

Reduce risk: The business processes can be risky at times and therefore it becomes necessary to get the work done from outside. Markets, competition, government regulations, financial conditions and technologies all change very quickly. So the risk can be reduced by giving the work to the outside firms who are better at getting the work done professionally and managing the risks at a better level and in a better way.

Outsourcing

Outsourcing today is being led by the combination of expertise in the following three areas.
1. Technical Internet expertise,
2. Paper handling and

3. Data capture expertise.
The outline of the software outsourcing process can be understood as getting the code from outside. The trend has been such that the businesses who are producers are themselves using the outsourced services. Today it is not regarded as a different thing using the term outsourcing as it was once when it was not known to everyone. Also one of the main factors to increase the trend is that the more than the developing countries asking for the work, there is a push by the developed nations to get their work outsourced.
Today, an estimated 1.6 million U.S. firms are outsourcing strategic business functions to over 146,000 suppliers, with total expenditures estimated at $108 billion per year. The growth of outsourcing confirms the continuing shift in the way America does business.
The companies today are focused on to what they can and should provide to the customers for getting themselves valued among the customers. This is important in a long run and if the companies want to survive and keep ahead of the others.
There has been process improvement in the information technology and also the complexity among the process is reduced thereby making the costs and skills required to accomplish routine tasks affordable. Companies who can alternatively produce, have understood that it will be better to get the task done from the providers who can perform the same at lower cost and greater value while they can themselves concentrate on their core functionality.
This above approach can be summarized as - focusing on core activities, selectively outsourcing others - crossing industry boundaries. For example, manufacturers use value-added distributors to increase customer responsiveness and supply-chain agility.

Application Outsourcing

Application software are the software which are particularly build for a particular application.It can be attributed as the oldest form of outsourcing. There are still many pitfalls, although the path to success is now well trodden.
Although it is too old but even then it involves a range of issues. For example: What about the existing warranties transfer to the supplier? What for the documentation, operation procedures, etc? How will company wide processes, procedures, and so be addressed? Etc.
These factors tend to be critical and need to handled carefully, and steps to address them included in the transition plan, the SLA and the outsourcing contract.
The main point to be considered for the application outsourcing is that the management must be very clear with respect to what the product will deliver. The application must be efficient enough so as to explain what the product does and what are its limitations.
An important and efficient measurement tool we can use for the application is by comparing it against the old or the existing application. This will provide an up to the mark and a good idea for the performance of the application.
By evaluating for the performance we can easily determine the appropriate cost for the application developed. The cost evaluated can be again compared against the cost being incurred for current service. Essentially, a picture is being built, as to what the application developed will be able to deliver and whether it will be suitable for outsourcing.

How to scale up your business and cut costs

CHITRA PADMANABHAN VIJAY Posted online: Monday, April 25, 2005 at 0000 hours IST
MUMBAI: The telecom sector has been affected by constant price wars. In a market where players are looking at roping in customers by offering value-added services, the cost of acquiring a customer is constantly moving southwards. For instance, players are required to design various products and devise various schemes to counter competition. This was one of the typical problems faced by one of the clients of ICICI Onesource. In order to reduce costs on customer related activity, the telecom client with a customer base of two million, decided to outsource this service to a third party BPO player in India.
However, moving the processes to India was a major challenge for ICICI Onesource as it carried out activities like inbound and outbound sales and order provisioning out of the US and UK. “We had the responsibility of moving these processes to India in phases without disturbing the ongoing activity that was happening in various other centres,” said ICICI Onesource vice president for operations Ravi Pandit.
Transfer of processes:
The telco player did not want to retain its centre in the UK, the transition of the processes to India had to ensure that the India site was the mirror site of the other. As per the RFP (request for proposal) that was floated, ICICI Onesource was selected as the outsourcing partner. The fag end of 2003 was spent in mapping the transition of the dual sites such that each service component was never duplicated. This ensured that the costs of outsourcing were kept at a bare minimum and there was absolutely no compromise in service delivery during the transition period. The first migration was completed in Jan 2004 and the first outsourcing activity began with 11 seats and 28 executives. Today, the total BPO agents working in this system is about 600.
Addressing security concerns:
Security was the topmost concern for the client, but being India’s first BPO organisation to attain BS7799 helped ICICI win this deal. In case of ICICI Onesource, personalised data pertaining to customer never actually passes through the system. Instead, it remains on the client’s own database servers and ICICI Onesource uses the thin client technology to remotely access relevant data. “The computer keys we press in India are treated as input by out client’s system and the output from that application can be viewed on our computer screens in India,” said Mr Pandit. Also, as a measure of safety, personalised information is split into separate databases. The linking of both databases can only happen through a specialised software program.
Beating sales targets and keeping costs down:
In the present day, the system has been up and running for almost a year as a result of which the client has experienced significant cost savings. The client had plans to bring down costs in six different areas of the business activity, namely inbound and outbound sales, order provisioning, customer service, inbound and outbound collections, technical support activities and customer retention. “The client had set definite targets like that of conversion of customers which was set at 29% but the systems beefed up the conversion rate by 54%,” said Mr Pandit. The system currently handles about 20,000 calls a day and the client claims to save anywhere between 20-40% of the cost of servicing the customer.
Not only did the client scale up business in terms of number of processes offshored, but the sheer cost and productivity gains experienced by the client has given them healthy operating margins too.

source: www.financialexpress.com

Russian Software Outsourcing Industry: a Major Breakthrough

April 21, 2005 11:00 AM US Eastern Timezone
"Let's work together" said Former Soviet Union President and Nobel Laureate Mikhail Gorbachev, presenting the Russian high tech industry to an audience composed of Massachusetts business elite.

On April 12, 2005, the Massachusetts Software Council, the leading technology trade association in the state, held its traditional Spring Membership breakfast. Mikhail Gorbachev, formerly President of the Soviet Union and Nobel Laureate, gave the keynote presentation. Mr. Gorbachev spoke on the "Role of IT in the Global Economy" and introduced Russian software capabilities to the US business audience. The breakfast brought together more than 900 U.S. technology executives.
The key point of Mr. Gorbachev's presentation was the importance of equality in U.S. - Russian relationships in the areas of business and technology, as well as in the overall geopolitical relationship between the countries. He advocated building new bridges between U.S. and Russia. "Your meeting here is one of these bridges," he said.
Mr. Gorbachev pointed out that Russia seems ready to make a breakthrough economic step into the future. In the past, Russia succeeded in dominating in various fields of science and technology, and now the country seeks to apply these skills to become a worldwide leader in IT outsourcing.
The Russian IT outsourcing industry:
Many analysts recognize Russia as one of the principal players in the global IT outsourcing market. Russia has been exporting software services for more than 10 years, and today its average annual growth rate is 40%. Software export volumes are predicted to reach $1 billion in 2005. Low software development costs and highly skilled (especially in R&D) personnel are Russia's main competitive advantages. Recently the Russian government announced a support program for the industry, including creation of "techno parks," and legal and tax preferences are being considered.
Leader's opinions:
Joseph Feiman, Ph.D., vice president and research director at Gartner, commented that the Boston event might become a turning point in the way the Russian industry markets itself. "Russia's biggest asset is its highly educated and creative workforce," said Mr.Feiman,
Alexis Sukharev, AURIGA President, thanked Mr. Gorbachev for his contribution. "This exceptional event will become one of those mutually beneficial occasions that provides rich business opportunities to all participants and breaks new ground for further cooperation in the area of IT between US and Russian businesses," he said.
George Bell, Massachusetts Software Council Chairman said: "Surely the largest and best attended Massachusetts Software Council event ever."
About AURIGA, Inc:
AURIGA, one of the world's leading software services firms with engineering centers in Russia, offers robust business and technology solutions to the high-tech industry worldwide. We help our customers design, develop, test, deploy, maintain and enhance the most competitive software products and solutions. Auriga's software-outsourcing and technology-strategy consulting services are recognized as best-in-class by global high-tech majors for consistent quality and ground-breaking innovation.

Source:http://home.businesswire.com

Outsourcing – Effects on American Economy

There is a lot of focus being drawn on the offshore outsourcing. Numerous discussions are being carried on this topic and its effect on the American Economy. There has been a trend in America to offshore whatever product to a cheaper labor outside America. This has affected not only the industrial lives of people in America but also their personal lives. The effect of outsourcing can be seen from a scale software and hardware manufacturers to high tech products. Outsourcing at its current growth will only become a larger issue in the coming future.
Earlier it was felt that only the rusty belt of jobs were being outsourced but now even the high tech jobs are not safe from the stigma of outsourcing. The effects of outsourcing are being felt from manufacturing to engineering and software design positions.

It can not be attributed that the industry people are on their own interested in getting the work outsourced but the Corporations are under constant pressure from their investors to increase profits. One of the possible ways the corporations find to increase the profits is getting work done from a cheaper labor. The corporations also get other benefits working with the outsourced employees as they have not to deal directly with the employees for their problems.

Another advantage that these outsourcing companies is that the countries to which these companies outsource don’t happen to have stringent law and measures. Also the companies find it better to have the product manufactured in the same place where they have to sell the same. Moreover these companies don’t want to be left behind in the race for doing anything new, as the trend of moving offshore is growing day by day. If we think in a proper way, the different alternates are available for the reduction of the cost. These can be stated as below:
1) Identifying and removing the inefficient Processes: The main target for improving the profit has been the people working in the organization, but instead the focus should be moved to identifying the processes which are not productive and should be removed.
2) Understanding the customer needs: The working of the company should be designed in a way that it is useful to the customer and the company gets close to the customer and understand their needs. This can be beneficial as we won’t give our customers a chance to look else where.
3) Improving the Quality: More stress should be laid on improving the quality of the product, only a superior quality product can win over the competitors.
4) Getting Responsible: We should aim to be responsible and give the customer a service for the work required. The customer service should be kept at the top priority.
6) Be Innovative: We should try to be innovative and deliver new products to the customers before our competitor does. Keep one step ahead of counterfeiters by designing better and faster and adding more value to your products.

Canadian Firms Cool On Offshore

The majority of Canadian businesses most likely to send work offshore to low-cost countries have no plans to do so, the Conference Board of Canada says, but adds that they appear to have an inadequate understanding of the phenomenon.
The board said 58 per cent of companies responding to a survey indicated that "they were not offshoring any businesses or functions."
The report, titled Will Canadian Businesses Sink or Swim? was based on responses from 132 businesses. The board sent its survey last summer to companies that were considered most likely to engage in business process outsourcing by virtue of their size and the nature of their business. It released its report on Friday.
The board said inconsistencies in the responses suggest that decision makers have not invested adequately in understanding offshoring and its implications."Given the current prominence of offshoring in foreign media and business . . . it's surprising that little debate -- or even discussion -- has taken place in Canada," it said.
Companies most likely to go offshore were manufacturers (26 per cent), followed by high-technology firms, including software development (16 per cent), maintenance (15 per cent) and user support (13 per cent).
The size of offshore investments was small, the survey found, usually less than $100,000 a contract, and future investments were also projected to be low. Thirty-nine per cent of the respondents said their planned investment in offshoring was less than $100,000 and 31 per cent planned investment levels of between $100,000 and $1-million.
"The results indicate that there will be a low-level impact on Canadian employment during the next three years," the survey said.
The respondents most frequently cited in-house barriers, such as bad publicity, as being responsible for a decision regarding offshoring. The survey also found that cost savings were the most frequently cited driver for offshoring.

source: http://www.theglobeandmail.com

Evaluating The Cost Of Outsourcing

Before outsourcing the project development the cost of outsourcing should be evaluated. This should be done for better outcome from the bussiness processes.

Cost of Production
The main reason for the companies having an inclination towards the developing of the software by outsourcing is the cost. The companies are working hard every now and then to reduce the cost of the software. The cost is the main driver for the companies to be motivated for getting their work done from outside.

Getting the vendor’s Trained
Training the outsourcer about the business processes and the environment required to develop the application. The offshore companies must see to it if the cost of the developing the in house project outweighs the cost of getting the project developed by going overseas.

The CMM Levels
The quality in the software industry is measured by the CMM level. This level can be from 1 and go up to 5. The software companies are trying hard to increase the quality of the software developed in terms of production and efficiency. The software companies tend to increase their reputation by getting a higher CMM level.

Project Complexity and Business Processes
The project complexity and the scale of the project should be kept in mind while going for finding an offshore partner. The complexity can hamper the overall development of the application by an unorganized and inexperienced vendor. Also, it is critical to clearly map out relevant processes and rules and then reconcile differences between the vendor’s procedures and yours before beginning any project.

Maintenance Issues
The maintenance is the key factor which can affect the relationship in terms of its time period. If the company is going for a long term relation ship, it will try to find out a partener who can go for a less maintenance cost to him and also try to put efforts for an alliance where the management of the project is good.

Understanding the level of flexibility provided by the Outsourcer

Flexibility in is a broad term in the outsourcing world that applies to several views of the relationship. The flexibility can be understood in the following terms:

a. Scope of the Engagement –
The relationship with the service provider should start with the small projects and based on the work and capability of the service provider we should move to the big projects. There should not be all or nothing proposition. In simple terms we should insist to start a relationship with a low risk before moving on to bigger projects.

b. Ability to Right-size the Service Delivery –
The full use of the resources should be emphasized and the cross working environment should be emphasized. There are certain low level tasks that can be offloaded to other resources in an event of absence or increase in the volume of the work.

c. Receptive to Changing Conditions –
There should be a spontaneity ion the relationship that the service provider is able to respond to any changes occurring instantaneously. These changes can be any of the following:
1. support environment
2. volume
3. product/service glitches
4. new information

d. Speed of Deployment –
Although the deployment in a hurried fashion is not really required but to avoid the one in a hundred chances we should be prepared for the worst. We should just try to measure the ability and capability of our service provider to get up and run quickly.

e. Scalability –
The scalability for the business is a major point which must be considered for the business rolling.
We should know the capability of the service provider so that we can make full use of the resources. The service provider must be acquainted for the scale of the services he will have to perform.
There should not be a variation in the scalability for the task that can be performed by the service provider and the minimum task scale which the work requires.

India Ahead in Software Outsourcing

MUMBAI, APRIL 11

China is unlikely to create a software outsourcing firm that can rival the Indian giants of the industry for some time to come. This is largely due to limited domestic demand, piracy and lack of skilled personnel, the International Finance Corporation, the World Bank's private sector funding arm, has said.

Despite English being a top priority in the Chinese education system, China cannot compete in language-intensive outsourcing areas with countries where English is a native language, such as India and Ireland. On the other hand, growth of Indian firms in China would clearly present a competitive challenge to Chinese outsourcers.
According to an IFC report, titled "The ICT landscape in the PRC: market trends and investment opportunities in China," released in March, given the small size of China's pure-play outsourcers today, it may take years for a company comparable to leading Indian outsourcing firms to develop. Unlike India, where large Indian firms dominate the software outsourcing market, foreign companies moving their own software development operations to China are key drivers in China's outsourcing market.
The report is crucial as the Chinese prime minister Wen Jiabao has called for cooperation and collaboration between India and China to lead the world IT market.
"According to the company interviews, as much as 95% of all office software in China is pirated. Despite China's entrance into the World Trade Organisation, government initiatives to stop piracy have moved slowly," the report said.
In India, top software outsourcer employees almost 30,000 people and has total revenues of more than $1 billion, with over 90% of resources devoted to software outsourcing. This stands in stark contrast to China's largest software group, Neusoft, which has 6,000 employees and total revenue of $265 million, with only 10% of its revenue derived from software outsourcing.
DHC, one of the largest pure-play software outsourcing firms in China, has just 1,700 employees and revenues of $33.9 million.
Curiously, Indian outsourcing firms are attracted to China in view of proximity to Japan and access to skills sets (language) to better target Japan. At least five major Indian outsourcers have already entered China, with most taking aim at both the domestic market and the export market in north east Asia. Infosys has even suggested that one-fifth of their software outsourcing contracts would be outsourced to software development centres in China in the future.

source:http://www.financialexpress.com/fe_full_story.php?content_id=87671

Benefits of offshore development

The benefits of offshore development can be stated as below:
1. Significant cost savings, up to 80% in certain cases.
2. In some cases the offshore development company can reap the benefit by outsourcing a subsidiary task to the offshore partner while concentrating on the core issue. The offshore company can add significant technical knowledge also.
3. It is easy to recruit qualified programmers with expertise in the field at a low cost. We can also have a personnel suiting to our needs.
4. We can get low priced resources in the offshore destination. This is extremely useful in the temporary peaks and avoids the high recruitment cost.
5. Consulting and programming capacity is available at short notice without increasing long term personnel commitments.
6. Offshore development also reaps the knowledge gained by the offshore consulting assignments.
Some clients outsource their programming needs by getting programmers from India for short or long term projects to work onsite with their own design team. Others send whole or parts of projects directly to India for development.

Finding an Offshore Outsourcing Partner

To find a good offshore outsourcing partner is a tedious task. Following are a few of the characteristics which are desirable in an offshore partner:
1. Good communication equipment and facilities. Leased line or ISDN connections to the Internet are essential.
2. Good language skills. The offshore partner must be comfortable with the language of the client.
3. Experience and references. Check with a few of the references and ask for their experience and advice on how you should work successfully with the company. An experienced partner will be better than a novice in the field.
4. Visit the company and establish a good relationship with the offshore partner. Make sure they understand your needs and quality demands. The relationship with the partner gives dividends in the form of better work at low price.
5. Also, check that the company has adequate equipment, stable finances and good management.
A1-Technology Inc is an offshore outsourcing company which fulfils the characteristics stated above.

Finding an Offshore Outsourcing Partner

To find a good offshore outsourcing partner is a tedious task. Following are a few of the characteristics which are desirable in an offshore partner:
1. Good communication equipment and facilities. Leased line or ISDN connections to the Internet are essential.
2. Good language skills. The offshore partner must be comfortable with the language of the client.
3. Experience and references. Check with a few of the references and ask for their experience and advice on how you should work successfully with the company. An experienced partner will be better than a novice in the field.
4. Visit the company and establish a good relationship with the offshore partner. Make sure they understand your needs and quality demands. The relationship with the partner gives dividends in the form of better work at low price.
5. Also, check that the company has adequate equipment, stable finances and good management.
A1-Technology Inc is an offshore outsourcing company which fulfils the characteristics stated above.

Finding an Offshore Outsourcing Partner

To find a good offshore outsourcing partner is a tedious task. Following are a few of the characteristics which are desirable in an offshore partner:
Good communication equipment and facilities. Leased line or ISDN connections to the Internet are essential.
Good language skills. The offshore partner must be comfortable with the language of the client.
Experience and references. Check with a few of the references and ask for their experience and advice on how you should work successfully with the company. An experienced partner will be better than a novice in the field.
Visit the company and establish a good relationship with the offshore partner. Make sure they understand your needs and quality demands. The relationship with the partner gives dividends in the form of better work at low price.
Also, check that the company has adequate equipment, stable finances and good management.
A1-Technology Inc is an offshore outsourcing company which fulfils the characteristics stated above.

Russia Poised to Become the Next Global Leader in Outsourcing

MOSCOW, April 4 /PRNewswire/ --
- Russian Minister of Information Technologies and Communications to Speak in London
Russia is poised to become the next global leader in outsourcing as dramatic industry growth and a groundbreaking government initiative put the IT industry on an accelerated development track. The initiative will systematically leverage Russia's historical technical superiority to become the main destination for global IT giants.
At 25% annual growth and with software exports growing at 40-50% annually, IT is already outpacing every other sector of the Russian economy. With over 250 companies already active in offshore software development, Russia's outsourcing industry is expected to reach US$2 billion in the next two years.
The government will add impetus through a comprehensive tax and legal reform as well as through creating free economic zones and a national network of technoparks to replicate the success of India's Bangalore and Hyderabad. The government is committing US$650 million over the next five years to supplement the increasing flow of private investment.
Russia is rapidly establishing a niche in providing highly complex, value-added, innovative solutions that are lower cost and faster to market than those of their Western counterparts. Global giants such as Intel, Boeing, IBM, Cisco, Motorola, Dell, Siemens, Microsoft, and Hewlett Packard have long established their presence in Russia, benefiting from a strong pipeline of talented programming and engineering cadre.
"Our vision is for Russia to become a global center of innovation and entrepreneurship, a place where radically new, break-through technologies are developed," says Leonid Reiman, Minister of Information Technologies and Communications. "We want Russia to be a place where 'the next big thing' is born."
Minister Reiman will put the government's plan on foreign display for the first time at the 8th Annual Russian Economic Forum in London April 10-12.
Distributed by PR Newswire on behalf of Ministry of Information Technologies and Communications of Russia