Posts Tagged ‘business process outsourcing’


by Oliver Schmid

 

What is outsourcing and why might outsourcing be good?

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  • Do you make your own shoes?
  • Do you deliver your own mail?
  • Do you sew your own cloth?
  • Do built your own car?
  • Do you build your own house … by your own hands?
  • Do you have the skills to be your own physician and make your own medication?
  • Do you grow your own food and raise your own life stock?
  • Do you take care of your own trash removal?
  • Do you …. (fill in anything you do not yourself) … ?

If you answered ‘YES” to any of the questions above you are outsourcing.

Anytime a service is provided for something you don’t want to do yourself, anytime somebody else does something for you, you don’t want or can’t do you are outsourcing something. Have you ever thought about this when you are complaining about that too many things and too much work or services are outsourced?

Outsourcing has been around as long as mankind. Anytime somebody realized that they have a special skill for something and focus on this skill and providing these skills to others in exchange for services, goods or money it is outsourced.

Why are we doing this? Because we always were aware of the fact that certain people have special skills one might not posses themselves and in return this person might have a skill somebody else does not have.

Outsourcing is nothing that was invented yesterday. What is new, is that we have realized people in other areas or countries have the same skills but perform these skills for a fraction of the cost. Before complaining about outsourcing think about whether the task on hand that is outsourced would be something you wanted to do yourself and had the skills to do yourself.

Think about if each of us had to grow their own food, build their own homes, remove their own trash, … you continue the list … would we still be able to fly to the moon, invent all the technological gadgets we have today that make our lives so much easier and more comfortable. Be honest to yourself. Most likely not.

By giving work and services away too others we  freed ourselves to learn other things, specialize and improve on skills we have as well as developing new skills.

Reflect on your daily tasks, your job, your kids, your family. Aren’t you performing outsourced services for them because you know how to do a particular process or task.

Over the years I have learned and realized that most of the tasks or work we outsource to other countries are things we really don’t want to do ourselves. I have worked for instance with domestic call centers just to learn that the people working there are not really happy in their job. They don’t want to listen to other people complaining. They don’t want solve other peoples problems. Eventually these people leave their jobs because they get burned out or fed up with what they are doing. Churn in US call centers is many times higher than compared to Indian or Philippine call centers. The reasons here for will be subject of another follow-up blog, since the subject is so complex in itself.

We only outsource work we don’t want to do ourselves or are not willing to pay for if it would be done in our own country (onshore outsourcing).

Without getting deeper into why we are outsourcing and all the plausible and less plausible reasons, ask yourself when hearing about outsourcing or complaining about outsourcing:

  • “Would you be willing to it yourself?”
  • “Do you have the skills?”
  • “Would you want to perform the same work for the same amount of pay?”
  • “Would you be willing to pay for the service if it would be done by what you expect a fair wage if you would do the same work? “

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I just came across this great video talking about how outsourcing can make sense for your small business.

Dr Marc Kossmann and Charlie Seymour Jr explain how outsourcing can help you running your business better and more successful by allowing you to concentrate what you are doing best.

I am in no way affiliated with them but it makes really sense to me.



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by Oliver Schmid  – IAOP :: International Association of Outsourcing Professionals Member


1.) What is outsourcing?

For years, outsourcing has been on the mind of many business people but what one associates with the term outsourcing, might be conceived as something completely different by somebody else. The only common ground is the understanding to give a task or process that used to be performed internally to a third-party service provider for fulfillment.

2.) Types of Outsourcing:

Outsourcing can be as mundane as giving support to somebody else and might be as complex as having business core processes being performed by somebody else.

Typical tasks and/or processes that are outsourced can be:

  • Partial or Total Outsourcing: Some functions or tasks will be outsourced partially while other will be outsourced in its entire. Partial or complete outsourcing can also be seen differently and depends of the viewpoint (Customer / Provider) of the parties involved. It also depends of the overall functionality of the to-be outsourced operations and can often not be determined clearly.
  • There is outsourcing of only operational functions vs. outsourcing of functions, tools and personnel.
  • Business Process Outsourcing (BPO): Interpretation of the meaning of BPO varies and depends again on the point of view. From a customer point, it could be giving away an in-itself-closed-business-process for which the provider carries complete responsibility. From a legal aspect, it is imperative to define all roles and responsibilities in a contractual from and every party involved need to understand their individual responsibilities and the consequences for non-compliance.

3.) Goals

The possible reasons for customers to look more closely at outsourcing to are equally diverse and complex as its possibilities and approaches.

Therefore, only some of the usual motivations for outsourcing will be referred to here:

  • Focusing on core business:
    • An organization wants to concentrate its resources on its core business, and therefore functions that are not part of its core business will be outsourced.
  • Cost savings and optimization:
    • An organization wants to reduce its cost of doing business through outsourcing by creating a flexible cost structure, which is directly related to the performance of its service provider.
  • Purchasing skills:
    • An organization wants to benefit from the increased competence of the provider who considers the to-be outsourced function as its core business. Often, an organization also wants to reduce its performance risk through contractual reassignment of performance risk to its service provider.
  • Flexibility:
    • The provider can often offer the customer more flexibility in the implementation of the delegated services than it would have been possible to a customer with its limited resources and scope for action.

4.) An outsourcing project is divided generally into:

  • the preparatory and planning phase, which includes the Baseline analysis, defining goals and determining the future procedures,
  • the initiation phase with the selection of the provider. and the contract negotiations,
  • the implementation phase with the transfer and the Setup of the facility (or Transition to Operate) and finally the actual
  • the start of the actual operation

Looking at the continuous “life” of an outsourcing initiative the following phases will follow:

  • Review and optimization of relationship and implemented processes
  • At contract expiration either the transfer of all functions to a new service provider or the return of the outsourced functions to the organization (insourcing)

5.) Preparation & Planning:

At the beginning of each outsourcing, a strategic analysis is performed to determine which services or which divisions will be outsourced as well as where the interfaces between the internal and external providers will be in the future.

Following this phase the outsourcing scope will be defined, which will include the functional spectrum. It should definitely be avoided not to make any clear commitments at the beginning, because the scope is the basis for all further tests, the structuring of the outsourcing and the subsequent tender.

The next step would be the internal analysis (assessment) of all areas that are part of the scope:

  • What personnel and which assets are involved?
  • What type of data is available?
  • Current Cost?
  • Which services are currently performed internally and which are already performed externally?
  • To which extend have processes and services already been documented?
  • What is the quality of the currently performed services?
  • Is delivery of services consistent with the according service performance documentation?
  • Are there any legal aspects that need to be considered; e.g. transfer of licenses?
  • Are there any industry-specific aspects to be considered (e.g. in the financial area)?

Oliver Schmid has extensive experience in offshore outsourcing to the Philippines, nearshore outsourcing to Canada and onshore outsourcing of matrix oriented call centers.  He is also versified in outsourcing of data center operations and data center monitoring and support. In addition Oliver Schmid participated in various 3PL and Supply Chain outsourcing initiatives.


Oliver Schmid, EzineArticles.com Basic PLUS Author


Creative Commons License
The Structure of Outsourcing by Oliver Schmid is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.


by Oliver Schmid / 4954 IT Consulting, LLC

Nearshoring (also known as “nearshore outsourcing” and “nearshoring”) means sourcing service activities to a foreign, lower-wage country that is relatively close in distance. (Source Wikipedia)

outsourcing2

Outsourcing means that you are sourcing experts in their fields.
Now, you made the decision to outsource certain business processes. The question now remains, do you want to go offshore, (which is usually from a straight financial aspect the cheapest solution), stay onshore (usually the most expensive solution) or outsource to a near-shore service provider (usually more expensive than off-shore but less expensive than onshore outsourcing).
The question you may want to ask yourself: “But how good is an expert that has all the technical expertise but does not understand your business needs and requirements, due to cultural misinterpretation or due to language barriers. What benefit does it have, if you have the hardest time to contact the people you work with due to differences in time zones.”

This is what may happen when you outsource to offshore service providers.

Please, don’t get me wrong, I have nothing against offshore outsourcing, where it makes sense. Not all outsourcing projects lend themselves for offshore outsourcing. I have worked in the past on various offshore outsourcing projects. Some were 100% successful but some we had to change midway and bring some of the outsourced BPO (Business Process Operation) either back inhouse or to a onshore or near-shore outsourcing partner.

Near-shore outsourcing makes sense in outsourcing projects that require frequent personal interaction, like hands-on product training and/or education about product and company processes. Another area that lends itself as a perfect candidate for nearshore outsourcing is software and application development and here especially if it is an add-on development to an existing solution that is critical to the overall business process.

More and more countries close to the US, like Argentina, Mexico and Peru have companies that concentrate t deliver near-shore outsourcing solutions in the areas of software and other technical IT areas. These countries have the advantage of being close to the US in regards to time zone and travel distances. People and organizations understand the US business culture better than countries in Asia or Eastern Europe.

If you are exploring outsourcing opportunities at this time or any time in the future please contact me and I will together with you evaluate your requirements. I will not develop and propose a solution based on my experience alone, but I will work with you to come up with a solution that fits all your needs, makes financial sense and delivers, while guaranteeing sustainability of the solution for the future.

Together with you I will find the right partner for you and will work with you through the process all the way from intiation to completion. I will be your partner  and your consultant at al times, representing your needs, requirements and demands. I have implemented offshore and nearshore as well as onshore outsourcing solutions in the areas of customer service (call center on demand support), software development, IT Infrastructure hosting and Logistics and Supply Chain outsourcing to 3PL and 4PL providers.

A provider we agree on will have the  expertise of advanced technologies has alloweto provide innovative, customized, groundbreaking, sustainable Nearshore software solutions and providing your business with an outstanding value and a competitive edge.

I work with service providers in the areas of IT Consulting that have an uncommon combination of experience, know-how and leadership, which allows me offer consulting services on the application of information technologies to achieve substantial improvements aligned with your business objectives. Whether it is in the areas of

  • Internet,
  • Technology Architecture,
  • Business Intelligence,
  • Network Security,
  • or custom Software Solutions Development.

The providers I chose with you can perform

  • Risk Analysis,
  • Vulnerability Analysis
  • and develop security policies suitable to your organization.

They advice and development procedures that guarantee for your systems:

  • Integrity,
  • Confidentiality,
  • Availability
  • and Irrefutability (Non-Rejection).

For a free one hour phone consultation please contact me at +1-770-776-6182 or send me an email to oliver.schmid@4954itc.com

Outsourcing, Insourcing and Saving MoneyOutsourcing means retaining the services from somebody outside of an organization to perform a task that would normally be done by somebody within an organization.  Saving money has always been one of the drivers for considering outsourcing. If saving money is used as the only driver, any outsourcing project will fail badly. There has to be a strategic motivation behind outsourcing in addition to save money, such as …

  • … increasing efficiencies. For example: Outsourcing customer support can provide the opportunity to increase customer service performance by offering extended support hours, adding a potential for increasing revenue streams through up-selling and/or cross selling.
  • … freeing up internal staff to concentrate more on the core competencies of an organization

For any outsourcing project it is imperative that all parties communicate their needs and requirements at all times. Outsourcing does not mean handing of a task, process or business function to a third party and then let leave them with it for all eternity without any follow up interaction. Outsourcing means interaction and communication between all parties at all times, whether it is during the planning and setup stage or whether it is an ongoing interaction after going-live.

Some great resources I recommend in regards to Outsourcing and how it can save you money and improve your overall business processes are:

by Oliver Schmid / 4954 IT Consulting, LLC

Outsourcing EDI  is increasingly being chosen by companies of all sizes who engage  in EDI.   Suppliers are put under pressure from their customers to adopt EDI, but find that they are investing resources and money into, which may for the organizationa non-value-adding activity, while negatively impacting  the core business.  Even companies who come willingly to EDI are often put off by the extra resources and technical expertise it demands.

There are EDI Standards that have to be learned like ANSIX12, EDIFACT or XML and knowledge has to be maintained, since structure of these EDI standards changes all the time, as well as customers often change their internal standards and usually is your responsibility to stay up-to-date on these changes.  In addition EDI translation maps for your various trading partners (TP) need to be developed and maintained.

Learning and maintaining those standards, developing and maintaining TP maps on an ongoing bases,  plus the acquisition of an internal EDI Solution (Translator, Hardware) can be expensive.  To setup an in-house EDI System you need:

  • EDI Translation Software – The low end packages are a few thousand dollars and they go up from there. And usually you get what you pay for.
  • EDI VAN Services – A few hundred dollars to set up and monthly charges based on volume. And volume may go up quick, since a trading partner not only sends you an order (ANSIX12 – 850), but wants in return a “Functional Acknowledgement (ANSIX12 – 997). These are already two transactions for one order. The next thing a TP usually will require from you to be send is an EDI Invoice (ANSIX12 – 810) and you will in return receive a Functional Acknowledgement back. And already we are at four transactions just for one order. Transactions that may follow down the road are Advanced Ship Notices  (ANSIX12 – 856) (which are by the way one of the most difficult transactions to setup and to satisfy), Change Order Request (ANSIX12 – 860), etc.. And anytime you are not able to trade these documents in a timely and for your customer satisfactory condition you will get hit  with a Charge-back, which someday will be a complete Blog Subject of its own.
  • EDI Integration with your Business Software (Your ERP Solution or accounting package)  and this can be expensive. Even most EDI Packages today claim to seamlessly integrate with the major back-end systems, some customization is usually required and depend on your needs and your customers requirements.
  • EDI Technical Staff – You will need at least one technical person to set up the EDI Translation Software and integrate with your back-end system. This person will not only need to understand the technical challenges your business has on top of all the EDI requirements from your trading partners and of course the systems and software involved.
  • EDI Coordinator – At least one person, which will oversee the day to day operations of your EDI system to insure all your documents are flowing in and out of your systems  correctly and in a timely manner. This person is usually also the direct contact for your trading partners in case anything goes wrong on your end or your trading partners end and coordinates the resolution.

Summary: There will be some significant upfront cost and investments, as well as some ongoing investments in staff and operations to maintain an In-house EDI System.  This does not mean that you should outsource your EDI Operations at all cost, but you definitely should perform a detailed cost benefit analysis to see what makes most sense to you.

email: oliver.schmid@4954itc.com

Phone: +1-770-776-6182

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