Niyamath Parveez

The internet has quite clearly made the world seem like a smaller place. Connecting people with so many new communication channels and possibilities has made it easier for firms to interact with other companies and customers but that is hardly the tip of the iceberg. Many of the firms operating in developed countries will consider their cost of labor to be higher than what could be had in many developing countries around the world but working out how to channel and utilize this staff force is difficult. It can be an extremely bad PR move for any firm as it invariably involves placing some local based staff out of employment whilst hiring people from another country that is able to provide labor at a much cheaper rate. This is what is known as offshore outsourcing and has been a staple part of many firms’ international tactics in recent years. However, offshore outsourcing has generally seen jobs and departments move wholesale to a new country, perhaps with new offices being set up specifically for these jobs.

It is obvious to see why major firms with huge work forces will gain a benefit from this but smaller firms are unable to benefit from this. However, the internet has opened up the possibilities to employ a single person or very small team of staff, wherever a firm can find them. This means that no matter where in the world a potential employee is situated, they can be utilized to allow a firm to reduce their labor costs and save money.

There are web sites like the elance site which allows companies to advertise jobs they require to be filled and allow potential employees to tender for these jobs. This site, and many others, has dramatically changed the way that employers go about finding workers and fulfilling their work orders. The beauty of elance is that it is extremely simple for all parties to use the site and this is very useful for encouraging communication and shared workloads. A company will upload details of their job and interested parties can tender for the product, indicating the price they take for completing the job and the deadline with which they will complete the job in. It is possible for the tendering party to supply further information about their experience and credentials for fulfilling the job and there are additional tests than the tendering parties can undertake to offer some guarantee about their working experience. This provides a degree of confidence to the firms who are advertising the jobs and all customers will receive feedback, which also gives some form of indication about the quality of the work of a supplier. Once a winning bid has been accepted, the two parties can start sharing information about the job and it is possible for all parties to communicate directly through whatever mechanisms they choose, which can help speed up the process of outsourcing. If a firm has only infrequent jobs that they need completed in a short time, using an outsourcing site like elance is a fantastic way of working.

It is no great surprise that many firms and indeed industries have to freeze their budget expectations. This is true not only for this year but for a few years into the future. This is because many businesses are waking up to the fact that they need to re-organize to stay afloat during these tricky economic times but even though the budget available is dropping, there is no reduction in the expectations placed on workload or staff members. This means that people have to work harder for less money, which isn’t really fair but is a sad indictment of the current economic crisis that the world is facing.

One such industry is the IT industry, who has been hit particularly badly with regards to budget cuts and rising expectations. Of course, demand for IT work is never going to diminish and as new technology advancements such as social networking integration and Mobile-Commerce come into play, the demands placed on IT staff are on the up. There needs to be a very delicate balancing act between budget and demands but thankfully there are ways for an under-fire firm to gain help and assistance.

When firms have to pare back their costs, an obvious target is labor and it is inevitable that many firms will look to lower costs in this field. This is invariably difficult for the employees who find themselves faced with losing their employment but many industries point to the benefits that outsourcing brings in reducing costs. What is uncomfortable for employees can often be vital for the executive or management level of a business. However, outsourcing IT work can also bring a great number of benefits by allowing firms to get a hold of modern technology at a much reduced fee and possibly operated at a greater level.

Of course, the difficulty lies in being able to find the correct solution to suit the needs of all parties concerned. What outsourcing deal may be right for one IT firm or department may be very different for another. This is very noticeable when it comes to analyzing data and figures. Analysis is the backbone of modern business and it is often left to the IT staff to obtain and break down the numbers. A firm may employ analysts to specifically pore over the data and draw inferences from it but without the IT staff doing the retrieval work, nothing can be ascertained. However, unless the analysts know the retrieval methods, the parameters and times-scales, analysis is useless. There needs to a relevancy to analysis and no two firms need to be the same in how they mine data or regard it. This means that when working with an IT outsourcing partner, there needs to be a clear lineation of how the work is being carried out. A firm may have a great reputation for working in this particular field but if they do not operate in the way the buying firm wishes to work, they are not a very good fit. This means that all of the money expected to have been saved by outsourcing will have been wasted with no benefit brought in at all.

To many normal workers and employees in the major countries, outsourcing is an extremely bad word and one that only brings pain and misery. To the bosses it can be seen as a good thing because of the benefits it brings with respect to labor costs and maintaining quality but to the average Joe, well it is just a bad thing. Even President Obama was quick to say that outsourcing is bad and if you look around the rising unemployment, you would be forgiven for thinking that it is an evil that must be stopped before it goes too far and ruins Western civilization. As with all things in life, the hype and the hyperbole has probably overtaken the actual real life situation and now is maybe a good time for people to take a step back and re-evaluate outsourcing and determine if there can be any benefit for them with it.

It may shock you to realize you that outsourcing is one of the fastest growing industries in America and is providing a solution to many firms and employees all across America. The benefits of fast and reliable network connections and the ability to share workloads online has made it much easier to be located one place but work elsewhere and this is allowing the outsource benefits to happen internally in a country too. The main gripe about the outsourcing jobs that have went to India or Malaysia has been with people moaning about the fact that the jobs have only went there because they managed to undercut on price. It is fair to say that these emerging economies have been able to grab an advantage by having a lower wage structure than the West but there are other benefits to working with them too.

For many people, outsourcing still has to offer a quality of service or it will never be of benefit, regardless of how cheap the wage is. If the finished product or service is of a low quality, no end user is going to want to sign up or buy the product and the company will be left with a gaping deficit where sales used to be. This means that maintaining a good level of outsourcing is necessary and this is turning many people back towards the home market in order to find the right supplier.

More and more people are able to provide a service from home or from a location with a much lower cost which is allowing cost savings to be made. As financial savings are a major component of an outsourcing contract, this is giving US based citizens or small firms a fighting chance of winning a big contract which may mean that outsourcing is the answer to all of their problems.

It is very easy to demonize outsourcing as the big bad threat to local businesses and jobs but by looking at the possibilities that open up when outsourcing takes place, people may just find the answer to their own financial problems are within their grasp.

One of the things that many people take for granted in any organization is the HR element of the job but woe betide a firm that does not have a good one in place. If employees are unable to book annual leave or request time off, the morale of a company will start to dip very quickly and this can have a massive impact on the output and production levels. For small firms, it may be very easy to organize the HR elements of the job but if the employees contained within a company starts to rise, it may become more difficult to organize.

It is possible to have a company HR department but some of the jobs and software systems used to properly control the comings and goings of staff can be costly and at the moment, this is something that not every firm can afford. In a recession, costs are looking to be cut at every opportunity and some firms may find it difficult to justify the money they would need to spend on a quality HR department. Help is at hand for these firms as they should find they are able to outsource their HR departments and have the work undertaken for them by a quality outsourcing agent.

This is the decision that has recently been taken by Emap, a major magazine distributor and a major company in their own right. The fact that a company such as Emap has so freely moved into the outsourcing industry for all of their HR needs indicates that it is something that may bring a great deal of benefit. Wherever a market leader goes, it is likely that many other firms will follow so do not be surprised if more companies turn to a HR outsourcing specialist to take care of all their employee needs.

Not only is this move one that is capable of providing serious cost savings to a company, it can actually assist in improving the quality of the service provided to all employees. If the HR service being offered by the firm is currently not the greatest, placing the work in the hands of industry experts should see a marked improvement. This is because the outsourcing agent will have a great deal of experience of working with other companies to fall back on and will enable them to work more efficiently if any problems arise. This is the sort of activity and level of knowledge that firms are turning to outsourcing for, not just to make a financial saving.

Of course, in the current climate, any economic benefit that can be obtained should be pursued so the combination of savings with increased level of service is something that should be of interest to everyone. If you feel that your current HR provision is not quite up to scratch or you could obtain a greater financial benefit by outsourcing your HR requirements, rest assured that a great number of firms are thinking the same thing and there is no reason to not jump on board the outsourcing train.

Facts and figures can be presented or represented to prove anything and the best way to find out the truth in a situation is to look behind the main figures. This is not to say that companies or firms are being deliberately deceitful in their actions or reporting or figures but there can be many different ways to release statements or presentations. A company who has a number of goals and aims may need to present figures for one issue but these may not be relevant to their entire output or workload. This can be seen when examining a firm’s revenue, and considering the current financial climate, it is vitally important for companies to understand, how and where they are making any revenues.

Not every company is able to offer good news about their financial status at the moment but Tata Consultancy Services, an Indian based software Services Company was able to do just that recently. They announced that their revenues had risen by 12% during the first quarter of 2009. There has to be consideration given over to other factors to take in the full picture but one thing of great interest is the fact that financial services made up for just under 50% of the entire revenue earned by the firm. This means that the company is largely dependent on the financial sector which could cause problems if there was to be a change in the market. However, given that it is predicted that more banks and similar companies will be turning towards outsourcing to get through the current financial situation, it is likely to be a booming industry for some time to come. This means that Tata Consultancy Services should be able to keep their revenue levels high.

It is obvious that many banking firms are badly hit at the moment due to the current financial crisis that is engulfing the world and it makes perfect sense to see many of them looking to cut costs in anyway that they can. One of the best ways to reduce labor costs is to turn to an outsourcing firm for assistance and the benefits that can come from offshore outsourcing is not only restricted to financial benefit. Given that Tata Consultancy Services are working on behalf a great number of customers and clients; they are able to pick up a lot of experience and expertise, which ensures they can offer a great service to their customers. The reduced labor costs is one thing but if the service was terrible, the end users would not be slow in telling the firm and they may take their business elsewhere. This means that an outsourcing firm needs to provide quality at a cheaper cost and the results for the first quarter of the year suggests that Tata Consultancy Services are managing to do just that, especially in the difficult financial times we are experiencing.

The route of outsourcing is not something that every firm can benefit from but the results that have been obtained by Tata Consultancy Services indicates that providing an outsourcing service can be a great way to give your revenue a boost.

There was a classic rental car advert in the 1980s which trumpeted the fact that a company was the second highest rated in the market, which may seem like a strange thing to be proud of. The real spoils and congratulations go to the team or firm in first place but there was a very strong message behind the advert. The second placed team or company has an incentive to be even better and as the slogan says, “we are working harder”, which should give a greater level of benefit to the customer. This method has been replicated by Malaysia who has made a bold claim with regards to its output in the world of outsourcing and where it sees itself in five years time. India may be the number one country in the world for outsourcing but China, the current country in second place, gets a lot of respect and more importantly, business. This is what Malaysia covets so their announcement that they are going to channel their efforts into overtaking the Chinese and improving their own standards is sure to appeal to the firms all around the world who use offshore outsourcing to improve their status.

Malaysia is currently in third place with regards to outsourcing work, which is no mean feat in itself but the nation is desperate to improve their standing and intend to do this by greatly increasing the number of knowledge workers, graduates and qualified IT workers by over 20,000 within the next year or so. Even then, if Malaysia manages to achieve this aim, they may still fall short of what they need to manage their growth in the correct manner but at least they are moving in the right direction. That said, as more and more workers become skilled and able to work in this area, the demand from businesses to work there will increase, which will give further incentives and motivation to continue this process which should lead to an even bigger number of the population being skilled in these vital industries and tasks. This should lead to a cyclical effect where Malaysia manages to strive towards their expected goals and transform the nature of the workforce. As stated, given that Malaysia is currently ranked third in the world with regards to outsourcing, they are clearly doing a lot of things right but there is always room for improvement and this is the driving force behind their bold new moves.

One of the reasons that Malaysia believe they are a fantastic fit to be considered as an offshore outsourcing partner lies in the multicultural edge and benefits that the population shows. The workforce is deemed to be extremely versatile and able to adapt to any number of different situations which is a hugely important trait for any company looking to work with external bodies. Knowing that your outsourcing partner can be relied upon in times of trouble makes all the difference and Malaysia are very confident that their workforce has the necessary skills and traits available to do this role successfully.

Although the vast majority of talk about outsourcing in recent months has been of an extremely positive nature, it is not always the right option at the right time for firms. The fat that many firms are still undertaking due diligence before rushing into outsourcing proves that it is a vital business component and should not be used just because everyone else seems to be doing it. There is no doubt that used well, outsourcing is a fantastic tool and can be the difference between success and failure for some firms but there does need to be a review of the processes involved to ensure outsourcing will work for the best of all concerned.

This is exactly what British Airways have done in announcing that they are no longer continuing with their plans to utilize outsourcing. The firm had intended to outsource a number of parts and components of its website, www.ba.com and were hoping to tie in with major industry players and gain from their established third party knowledge and experience. Although then financial aspect is one of the major factors to pursue outsourcing as a business decision, gaining access to top of the range technology and systems is also another big reason why outsourcing remains on the agenda for many firms. However, BA also had the fact that the website was costing them around £30m each year to run so clearly there was scope to make a monetary saving.

However, no outsourcing task comes without costs and after examining the tenders and the situations, the bosses at BA have decided to not continue with their outsourcing plans with a lack of sufficient efficiencies cited as the main reason the plan has been put on the back burner. The unpredictable nature of the world economy has caused many organizations to reassess their view on the world and has caused many to take a more cautious approach to signing new contracts or undertaking new work. It is one thing signing a contract to ensure money comes in but if the deal is for long term and the market recovers, the firm could be on the end of a very bad business deal. Many small firms do not have the option to think too long term and need to sign deals to keep themselves solvent in the short term but a company like British Airways can probably afford to take a wider view of the situation.

It is still likely though that BA will continue to look for ways to improve their website and drive down the cost of maintaining it so this may still lead to work and projects for some of the firms involved in the outsourcing process, one of which was believed to be ITA Software, an American based company. As part of the reason for examining outsourcing was to find better and more relevant technology, BA are likely to remain in the hunt for improvements and this may well see them work with some of their potential outsource firms on a more informal basis.