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Is "outsourcing" just another management buzzword? Or is it a management
fad? You have probably heard of it, or perhaps you are evaluating
outsourcing firms to provide you with the required services. But,
is outsourcing really beneficial to your business? In this issue
of management matters, we will discover how your business can achieve
competitive advantage through proper outsourcing.
What is outsourcing?
Outsourcing can be defined as "the assignment of specific work to
a third party for a specific length of time at an agreed price and
service level." Outsourcing is typically about how well the vendor
(someone who provides you with the outsourcing services) can tailor
his/her services to meet the client's specific operational requirements.
Their ability to work with you is important, after all what you
really want is a hassle-free service.
Some of the outsourcing services available in the market today
are:
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Payroll and employee claims processing |
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Accounting and book-keeping |
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Computer and network maintenance |
With the economic crisis looming, companies are reminded fervently
to stay lean so as to keep up with the fluctuations in the marketplace.
It is important for businesses to stay focused and align their business
development strategy with their core competencies - i.e. area which
the business can derive its competitive advantage. You may ask:
if a business focuses on her core expertise, what happens to the
ancillary functions such as accounting, payroll, information technology
(IT), and credit management that are equally important? Traditionally,
these functions are managed internally for better control. However,
with the shortage of labour and the human resistance to change fast
becoming a real problem encountered by many businesses today, companies
may want to consider outsourcing their non-strategic functions,
while directing all scarce resources to the core functions of the
business.
What are the non-strategic functions to outsource?
We can divide the non-strategic functions of a company into two
categories:
Secondary activities
These are tasks that must be performed conscientiously to ensure
the smooth running of the business. This includes your accounting,
payroll and/or data processing functions.
Non-critical tasks
These are tasks of a lower priority, but they must be accomplished
still. For instance, your company needs to be cleaned regularly.
For such non-critical tasks, outsourcing is most suitable - with
minimal risk to be incurred.
Why should you consider outsourcing?
| 1 |
Optimal utilisation
of your scarce resources
Management should commit their scarce resources to the highest
value-adding areas of the business. For example, if you have
limited funds to invest, you should commit your funds to the
core areas of your business, rather than investing them in a
non-core function. |
| 2 |
Effective delegation
of manpower
Labour shortage is prevalent in almost every industry these
days. Recruiting, training and retaining of good staff are no
easy undertaking. What if you recruit a wrong candidate for
the job? What if your staff fails to accomplish the assigned
tasks competently? And what if they leave the company without
due notice? If you are short of manpower, you should seriously
consider engaging professional help to take care of your non-core
business functions. Your staff can then be freed to handle the
core business activities. Usually, these outsourcing vendors
can do a better job because they have the infrastructure, experience
and skills to provide you with the required support. |
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Tapping into the expertise
of your vendor
Because these vendors are trained specialists with rich industrial
experience, they are able to understand your requirements and
provide you with innovative ideas to help you improve your existing
management functions. These vendors may be better streamlined
in terms of business processes or operations. They may have
invested in new technologies, or proven methodology to back
their outsourcing services. Learn from your vendors - they can
be your rich source of information and ideas! |
| 4 |
Sharpening your business
focus
With outsourcing, you need not have to worry about the execution
of non-core operational functions. You can simply divert your
attention and resources to grooming your business, reacting
quickly to market changes, and making profits. Especially with
the advent of technology and keen market competition, we need
to constantly remind ourselves to stay focused in our business
objectives. |
Outsourcing - Where should you begin?
| 1 |
Start with your company's goals and objectives.
You may first develop a clear understanding of what your company
wants to achieve, and then translate these objectives into a
policy for outsourcing. Your management's support and commitment
to outsourcing is equally important. Understand the objectives
of outsourcing and think through the processes carefully. If
you don't know where you are heading, then don't jump into it. |
| 2 |
Conduct a quick review of your currrent business
functions and determine which are the core and non-core activities.
From the list of non-core activities, you may then decide which
are the ones to outsource. Make sure there are ready vendors
whom you can engage to assist you. |
| 3 |
Be selective with your choice of vendors.
Make sure the chosen vendor is compliant with the quality service
standards set by your company. For example, you may expect your
vendors to complete all processing by the 10th day of every
month, etc. |
| 4 |
Appoint a co-ordinator to oversee this "vendor-company"
relationship. Always strive to keep the channels of communication
open between the company and the vendor to avoid any misunderstanding.
You need to keep your staff informed, especially those who will
be directly affected by outsourcing. Think of how you can better
deploy your staff's services within the company. Retrenchment
is never the easier way out. |
Here are some practical pointers to help you
in your vendor selection:
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Identify only vendors who share your company's
value or philosophy. |
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Remember - the cheapest may not offer you
the best service! Instead, try to understand what the vendors
can deliver. You may be paying more for their services, but
you are getting in return better customer service, quick response
time and commitment. |
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Check if the vendor's proposed system and
processes complement yours. |
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Assess how flexible the vendor is. Does he
insist on doing things his way all the time, or is he willing
to listen to your requirements first? |
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Finally, choose only vendors who are capable
of helping your company innovate and improve on your current
workflow and/or processes. |
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