Technology and 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. The first 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 ahead.

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.

Transaction volume 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 of it.