globalization of world economy has shrunk geographical boundaries
and has changed the way we carry on business. Outsourcing of activities
never before thought possible is now a reality. Does this mean
any function or process in the business domain can be outsourced?
How does one select a process for outsourcing?
Businesses are a combination of core and non-core processes.
Non-core processes are often transferred to a third party service
provider. This transfer of activity helps the business in achieving
cost reduction, higher efficiency, improvement in service quality,
and expertise in specific outsourced activity. In a typical
outsourcing contract, a service provider takes over defined
corporate function, which is not only managed efficiently but
is also re-engineered to enable higher productivity.
The big question before outsourcing any function
or process is to decide the feasibility of the entire exercise.
step in checking the viability is to identify the key parameters
of the function or process to be outsourced. Then the complexity
of other parameters involved needs to be assessed before going
The key parameters that decide whether the
process can be outsourced or not are:
Metrics of process: Whether the process to be outsourced is
measurable in units? In order to establish service level agreements
(SLA) to measure provider's performance, the company must first
quantify the workload deliverable.
of process: This is the number of times
the process is repeated (in a day/week/fortnight/month). A
larger volume implies a better prospect of outsourcing.
Mission critical: If the process is critical to business it
is probably better to keep it in house till the company moves
along the learning curve in the outsourcing process.
Basic domain knowledge: Does the process require any specific
knowledge? If yes, availability of requisite talent becomes
a key factor.
Training efforts: This is important as it estimates time and
cost to train manpower to perform the required function.
That is not all. There are a few other important parameters
to be assessed before making the final decision:
Human Resources: How many people with specialized skills are
currently required to conduct the process? An outsourced process
typically occupies a large number of qualified people if it
is to have any significant impact. Is the required talent available
at the outsource location? Can a person acquire the nuances
of the business process easily? Is there any statutory qualification
required for the process? How important are soft skills in
carrying out the process?
Infrastructure: Does the process require any unique facilities?
If yes, the cost of developing such infrastructure is to be
added in overall cost of outsourcing.
Technology: Can the information in the process be digitized?
Digitization is essential to enable electronic transfer of
data. Security requirements also need to be assessed if confidentiality
during transfer is important.
These points serve as an initial checklist for outsourcing.
Processes that fit the requisite criteria can be suitable candidates
for further consideration for successful outsourcing.
It is important to note that outsourcing
can be a strategic tool for making your business more profitable
if it is done
for the right reasons and you know how to take advantage