A Comprehensive Global Outsourcing Overview

Global outsourcing involves a company outsourcing services or projects to a third party in a foreign location. The third party is usually a firm that employs workers or the third party is an individual who offers various services.  Employers will generally hire the third party to complete a whole project or some aspect of the project. Global outsourcing has both benefits and risks. However, global outsourcing is on an upward trend.

Why global outsourcing is on an upward trend

Global outsourcing is becoming an increasing trend among businesses because of various factors. One of the leading factors is the comparative condition of richer economies in the world market. Employers are able to find employees in other countries that will do much more work for the same price as an employee in wealthier countries. A $200 budget might buy a company a week or two worth of work from an employee in India but not nearly as much in a richer country. This does not necessarily mean lower quality work because the dollar goes much further for many employees working in foreign countries.

Another factor for an upward trend in global outsourcing is that U.S. dominance over the marketplace has made English the de-facto language of the business world. For many people in countries around the world, learning English is an essential to having success. Thus, this allows employers to communicate with employees from different countries through English.

Furthermore, the recent economic recessions and hard times has forced many companies to look for cheaper alternatives for completing work. Global outsourcing provides the means for companies to save more money. Companies do not have to deal with overhead costs associated with hiring, managing, and training employees. Additionally, employees and employers are usually in different time zones. Thus, this allows companies to get work done faster. An employer can essentially work a normal day and then have the work continued overnight as someone works on it in a different time zone.

One last factor for the increase of global outsourcing is new technology in methods of communication. Today employers can use many different methods to communicate with foreign workers. The increase of use in video chat has given a face to employees, making employers more comfortable working with them. Additionally, Skype and other forms of live communication have enabled easy and fast communication across continents. As foreign nations continue to build their IT infrastructure, these methods of communication and employee availability will increase.

How to mitigate global outsourcing risks

There are obvious risks associated with global outsourcing; however, there are ways to mitigate the risks involved to ensure a smooth work relationship and high-quality results.

One of the more notable risks that people associate with global outsourcing is the quality of work. Most people associate cheaper employee costs with less quality work. This may be true in some cases, but there are ways to mitigate the risk in order to get high-quality work. Employers should always look at customer referrals and reviews of employees before hiring. If the employee does poor work, then the reviews and comments from other employers will highlight it. Furthermore, it may be wise for employers to use reputable, well-established companies to find workers. Since these companies have a reputation to protect, they will more than likely provide the employer with employees who perform high-quality work.

Another risk that dissuades people from global outsourcing is a perception that there will be communication barriers between the workers and the employers. If there is a communication barrier, it is often minimal and can be avoided in most situations. The risk can be mitigated by using employees from countries that commonly use English such as India and the Philippines. Furthermore, by structuring requirements as concise and clear as possible, it will reduce the probability of an employee-employer communication problem.  Additionally, since most employers and employees will reside in different time zones, it is critical that the employer responds to employee inquiries and statements as soon as possible. It is also advised to create a time where both the employer and employee can communicate live. This is essential to maintain a strong communication relationship.

The business and personal decisions involved

Employers must weigh multiple criteria when deciding to outsource work to employees on a global scale. Similarly, once the decision is made to outsource, further factors must be considered in order to accurately and effectively get the services that the company is looking for. The following list describes some of the business and personal decisions that are involved with deciding and ultimately executing global outsourcing.

Numbers: An employer must consider the scope of the services that they will be outsourcing. Next, they must establish a budget that will accurately portray the funds necessary to meet the goals that the organization has set in place for the project. The employer should then compare the services that they will receive for the allotted budget from outsourcing globally and from other methods. If the comparison results in global outsourcing being the most financially beneficial, the employer should proceed with shopping around the market to find the best candidates possible for the budget.

Employees– Perspective employers interested in considering global outsourcing must consider the decision of whether or not they want to essentially deal with a faceless employee.  Outsourcing communication primarily uses faceless methods such as email. This can make employers feel uncomfortable, as many employers prefer face-to-face communication where they can read body language. If employers can deal with faceless employees, they should also make sure to give the most detailed and clear instructions possible when giving project requirements and expectations.

Location- Employers must consider what location to outsource services to. Global outsourcing can be found in many different parts of the world from South America to Asia. Overall, Employers should always stress for the best deal and talent possible over location. However, when given a choice, the employer should hire from countries where English plays a fairly large role in the culture. This will prevent many problems of communication between the employer and employee.

How to Get Started with Software Outsourcing

What does Software outsourcing consist of?

Software outsourcing involves a company outsourcing software development needs to a third party outsourcing firm. The outsourcing firm is contracted to develop the custom software in accordance with the companies’ specific requirements and instructions. The outsourcing firm will establish the specifications, requirements, and deadline through a Service Level Agreement (SLA) with the hiring organization. Software outsourcing provides many benefits, including reduction of cost and the gain of expertise. However, hiring organizations must be careful to outline their specifications in clear detail to the outsourcing firm.

Software Development Outsourcing

Why a company should utilize software outsourcing

There are numerous benefits and advantages for a company outsourcing their software needs. The list below describes some of the ways that a company may benefit.

  • Ability to control costs of projects– By outsourcing, a company can agree to a set project budget with the outsourcing firm. The outsourcing firm must agree to the specifications and milestones of the agreement. This is an advantage to organizations because they can avoid the risk of exceeding budgets if they were to build a project internally.
  • Experienced workers– An outsourcing company will use a team that they know will have the skills and expertise to complete a job and more than likely already have these people on their payroll. Companies can avoid having to waste time interviewing and trying to find the people with the right skill set to get the project done.
  • Technological expertise consulting– Outsourcing companies will be able to provide a company with advice and consulting on the ever-changing field of technology. It is the responsibility of outsourcing firms to maintain an updated expertise on the field.
  • Reduce overhead costs associated with software projects– Outsourcing reduces the responsibility of companies having to deal with overhead costs such as human resources. Companies do not have to hire and manage employees for it nor do they have to deal with providing the staff with equipment or facilities.
  • Increase efficiency of company employees- Through outsourcing, a company can free up time for employees to focus on other essential tasks to the companies vision and profit centers. Furthermore, this may allow a company to save costs on personnel.
  • Accurate deadline for project completion- A company can set an agreement with an outsourcing firm to have the project or milestones of a project to be completed by a certain date. This is an advantage because if the software project is built in-house, then it risks being delayed by operations and daily activities.

Issues to be concerned with outsourcing software development

As with almost all the outsourcing options, software outsourcing has concerns that companies should consider when trying to decide if they should outsource their software needs. One of the foremost concerns is security. It is a large liability for a company to outsource software needs to a third party, especially if it is overseas. The company has no control over the security that the outsourcing firm implements, and they may be sending sensitive information that could damage the company or harm its reputation if exposed by security flaws. Furthermore, there may be different laws and regulations in foreign countries that perform outsourcing duties. Companies that wish to outsource software must consider the question of whether the outsourcing firm can be trusted, and if they have had security issues in the past. Larger, more established firms may be the best option because they will usually have strong security systems and procedures in place. Conversely, this security on some occasions is more in-depth and more reliable then the organization could provide in-house. However, they still lack overall control and responsibility.

Another large problem many companies may face with outsourcing software to a third party is that the outsourcing firm may not completely understand the requirements or needs of the project. This may be realized too late in the process, often when the project is finally completed. It is sometimes difficult for a company to accurately describe what they want in a project in enough detail for the outsourcing firm to complete the project to the hiring company’s expectations. Furthermore, by outsourcing, a company loses the potential to adjust the project through adding features or aspects that may become apparent over the course of developing the software. Companies lose control over the project by outsourcing and cannot manage employees.

Advice for Software Outsourcing

One of the most important and critical aspects of software outsourcing is establishing a clear understanding of the projects specifications and expectations between the company and outsourcing firm.  The hiring company should establish a specific and clear Service Level Agreements (SLA) with the outsourcing firm. In the SLA, the hiring company should define project specifications, availability, functionality, and performance of the project. Additionally, the hiring company and the outsourcing firm should establish goals and deadlines for meeting project completion. It may be wise to create a review period in the SLA that enables the hiring organization to have change requests and the ability to integrate new technology that the outsourcing company can provide. The SLA should also govern the security procedures and systems that are in place. The hiring organization may establish penalties for information that is not correctly secured.

A hiring organization should read testimonials, conduct research and ask other customers about their experience with various outsourcing firms. They should pay special attention to whether or not the outsourcing firm has the capacity to stay up to date with the software technology industry. It may be wise for the hiring organization to ask what industry publications that they subscribe to and how they plan to learn and adapt to the ever-changing field of software technology.

Software outsourcing companies

There is a multitude of software outsourcing companies that offer many software development services to a range of industries. Many of these companies are located offshore or have offices located offshore with the headquarters being located in the U.S. The following three companies are some of the leaders in the software outsourcing industry.

A-1 Technology- A-1 is a New York based software development outsourcing company. A-1 has additional locations in Florida, Los Angeles, New Jersey, Toronto, Stuttgart (Germany), Singapore, and India. They also offer offshore software development that provides custom application development as well as mobile application development. A-1 offers expertise in the areas of dot net programming, RIA/Web 2.0 (flash, flex, Ajax), Google TV, Linux programming, quality assurance services, and Apple TV.

DataArt- dataArt is a custom software development firm that caters to the fields of hospitality, financial services, healthcare, and other industries. DataArt has software engineers located in New York, London, Russia, and the Ukraine.  DataArt can offer services for Microsoft .NET, Microsoft SharePoint, Microsoft CRM, Java, Cloud Computing, Unix/Linux, and mobile platforms- Symbian, iOS, Android, J2ME, and RIM.

TatvaSoft- TatvaSoft is a software outsourcing firm located in India. They service industries in many fields, including Oil & Gas, Retail, Finance, Sports, insurance, and enterprise solutions. They offer application development, web development, .NET development, Silverlight consulting, PHP programming, Flex programming, SharePoint consulting, and application maintenance.

Software outsourcing for the little guy

Companies are not the only ones that need software outsourcing. Smaller organizations and individuals also need it done. Since software and programming is not a physical product, it is very easy to have it done by anyone, anywhere. Individuals can utilize freelancer sites to utilize quality workers internationally at reasonable rates. No job is too big or too small.

Get the Most from Business Process Outsourcing Services

Business process outsourcing services involve companies contracting the responsibilities and operations of various business processes and functions to an outsourcing firm. The outsourcing firm is sometimes located in the same country, which is called nearshore outsourcing, or in another neighboring country, when offshore outsourcing.

The processes and functions that are usually outsourced fall into the category of either front-end or back-end processes and functions. Back-end processes and functions consist of areas such as human resources, accounting, and finance. Front-end processes and functions consist of areas such as customer-related services. The following bulleted list contains commonly outsourced business processes.

  • Document processes: This outsourcing includes marketing and communications, finance accounting, compliance documents, and customer facing.
  • Human resources and training: Human resource outsourcing involves training and recruitment, management of databases, management of contracts as well as retention and attrition.
  • Customer relationship management: Functions and processes outsourced are customer service and support, taking of orders, help desk support, product support, and market research.
  • Intellectual property: Outsourcing includes licensing support, research, analysis of patents, and patent application management.
  • Finance and accounting: Outsourcing of finance and account services includes expense management, credit and debit support, auditing, invoice management, accounts receivable and payable in addition to resolution of billing disputes.
  • Supply chain management: Supply chain management outsourcing includes management of contracts, procurement, logistic support, warehouse management, and relationship management.
  • Legal services: This outsourcing involves risk evaluation, mediation and arbitration, consultation, research, and support for legal functions.
  • Security: Involves outsourcing for maintaining and securing data, equipment, and documents from theft. This can involve physical security, investigative services, computer and network security, and electronic security systems.
  • Transaction processing: This outsourcing deals with the main function of payroll maintenance. It can also include processes such as research, payments, check and credit cards, stock trading, mortgage, loans, and insurance.
  • Publishing: The outsourcing of publishing processes includes design, internet publishing, graphics, drawings, and administration.
  • Research and analysis: Aspects outsourced include analytics on finance and data, market research, and primary/secondary research.
  • Administrative support: This outsourcing includes conversion of documents, data entry, document scanning, processing of forms, and other secretary related tasks.
  • Sales and marketing: Involves outsourcing activities relating to surveys, cold calling, pitches, and lead generation and nurturing.

Benefits of outsourcing business processes

There are numerous benefits to outsourcing business processes, and many companies are starting to outsource at least some aspect of their business functions. One of the primary benefits is reduction in cost. Through outsourcing certain functions, companies can save more money then if they were to operate the function in-house.  This reason is also why many companies are choosing to outsource offshore, as offshore is usually a cheaper option for outsourcing.

Another benefit is that certain outsourcing organizations specialize in specific fields and can offer better service because it is their area of expertise. For example, if a company were trying to make their organization more secure and use the latest new technologies, then it would be wise for them to employ a firm that offers security professionals. The firm will better be able to provide the most up to date and accurate advice and suggestions on security because it is their specific niche. Furthermore, outsourcing enables an organization to concentrate on its core business functions. For instance, many companies do not consider human resource a core business function. So through outsourcing human resources, the company will be able to allocate more resources and time to their core processes that drive the company’s vision. This can lead to better performance and more revenue.

How to choose a business outsourcing company

First, companies must choose which non-core processes that they wish to outsource. The processes should not be essential to the vision of the firm, and the processes should have the potential to be re-engineered by the outsourcing firm in order for the organization to save money. Next, the hiring organization must narrow down the field of outsourcing firms based on certain criteria. Criteria that organizations should consider are expertise, cost, location, customer service, reputation of the outsourcing firm, and the transparency of operations.

The hiring organization should get quotes and look at the contracts that the outsourcing companies provide. The contracts should be read thoroughly and compared to see if there are any hidden costs or agreements that are not ideal for the hiring organization. Once there has been a thorough comparison of what different outsourcing firms can offer, then the hiring organization should make the final decision. Depending on the size of the organization, it may be wise to hire an outsourcing advisor that specializes in consulting organizations on choosing the best outsourcing firm to meet the needs of the organization. The advisor will typically also negotiate terms and contracts with the outsourcing firm.

Business process outsourcing companies

IBM Global Process Services

IBM Global Process Services is the largest outsourcing company in the marketplace today. The outsourcing processes that IBM offers to clients are customer relationship management services, finance and administration, human resources learning and recruitment outsourcing, and procurement and supply-chain management. IBM offers industry-specific processes for companies that are in the fields of banking, healthcare, government, telecom, and insurance. IBM has helped large companies such as GM, Yahoo, and Southwest airlines to meet their outsourcing needs. Working with IBM is beneficial because they are an established company that works to maintain a strong reputation.

Accenture

Accenture is the next largest business process outsourcing company. They offer three fields of process outsourcing. The first field is cross-industry business process outsourcing, which includes engineering, finance/accounting, human resources, learning, procurement, and supply chain. The second field of business process outsourcing that Accenture offers are, industry-specific services such as credit services, health administration, insurance, network, and utilities. The third field that Accenture offers is bundled outsourcing services. Bundled outsourcing services involve Accenture re-engineering the operations of the back-office to reduce cost and to increase flexibility by merging together multiple business functions.

MphasiS

MphasiS is also one of the largest business process outsourcing firms. They offer industry tailored business processing services to industries such as telecommunications, banking, capital markets, insurance, and healthcare. They also offer business process services to enterprise companies that include transportation & logistics, manufacturing, retail & consumer goods, and energy & utilities. MphasiS emphasizes their established methodologies to their clients. They claim to have an established methodology for transition, transformation, BPO-IT integration, and steadygovernance.