Can You Afford to Outsource?

How Much You Should Be Spending On Outsourcing?

After writing my first outsourcing article, I have come to realize that there are just simply too many people looking for information on outsourcing. Look on the top right on A Dawn Journal, for instance. You see, the number one all time popular article on ADJ is on outsourcing–and looks like it will stay there for awhile. To answer the many other outsourcing questions you may have, I have decided to write more posts on this subject. Today, I will give you my opinion on how much you should be spending on outsourcing.

If you are willing to spend any amount on outsourcing, you could go ahead and do it but it would not be a good personal finance decision. When I outsource something, monetary value is very important to me and I would not outsource anything unless I am totally satisfied with the money I am spending. But how do I know I can afford to outsource? I use a very simple formula. First, I look at the whole project in terms of how much time I would spend to do the same thing. Let’s say I would like to outsource the chore of replying to all my emails. I spend 2 hours daily replying to my email. If, for example, my salary is $10 per hour, I would therefore be spending $20 of my time daily replying to email.

Now, what’s a reasonable amount for me to spend if someone else is doing it for me? Simple–it has to be lesser than 1/3 of my own cost doing the same thing. In the above email example, I would only outsource if I could find someone willing to look after my email for less than $7 a day. This is just how I do things and you don’t have to follow my formula step-by-step. Come up with your own figures that make sense for you. One thing you need to keep in mind: there are some projects on which you will not be able to put monetary value by comparing it with your own hourly rate. These projects are those which need to be done regardless of costs, such as redesigning your website, producing a professional-looking eBook from your word document, etc. For these types of projects, I recommend that you post your projects on more than one outsourcing site and pick the one with lowest cost. Read my previous outsource article to obtain a list of outsourcing websites.

I hope today’s article will help you figure out if outsourcing is for you and what you can afford to spend on it. I’ll be writing more on this topic in the future, so keep checking back. Don’t forget to bookmark this page for later use.

A Quick Look at the Facts and Figures on Outsourcing

Outsourcing is neither a curse nor a blessing. It is a phenomenon that is changing the world and presenting a challenge to chemistry as we have known it. Basically it’s the transfer of a function and that affects jobs and individuals. It can not be argued that outsourcing has a detrimental effect on particular individuals who face job disruption and insecurity; however, outsourcing should bring down prices which provides greater economic benefit to all (whether prices are really dropping is debatable).

One of the main reasons for outsourcing is the divestiture of a business function involving the transfer of people and the sale of assets to the supplier. The process begins with the client identifying what is to be outsourced and building a business case to justify the decision. And can also be a way of contracting with another company or person to do a particular function, almost every organization outsourcers in some way.

It is also high on the agenda of firms seeking to cut costs. Based on an enhanced value-chain concept they develop a model that determines the conditions under which outsourcing is not expedient, which is a good way for the general counsel to control costs and improve efficiency.

It’s increasingly recognized by businesses, universities and economists worldwide as a new management science. Which not only dramatically reducing business costs, but is spurring innovation and wealth creation all around the globe. Outsourcing is about efficiency. As costs decline, every consumer benefits, including those who lose their jobs to outsourcing.

Companies and Outsourcing

Companies often have underutilized facilities and equipment. When a contract manufacturer takes over a plant in an outsourcing agreement, it can add volume from other customers to improve utilization and the resulting economics. Actually some companies have always hired contractors for particular types of work, or to level-off peaks and troughs in their workload, and have formed long-term relationships with firms whose capabilities complement or supplement their own.

But most companies won’t outsource everything, because some things just don’t outsource well. Either they’re too close to the business, or they’re too expensive for an outsourcing company to deliver efficiently, or they simply don’t scale well.

Companies will be prepared to pay well for good outsourcing services because they will want quality products for their finished project, so it is wise to know how professional a company is before you decide to outsource. But outsourcing is no longer just an after thought for companies that want to cut costs and avoid the overhead of managing technology, it can also be used by individuals who want a job done in a topic they know nothing about.

Graphic Design Outsourcing Tips That You Should Know

Graphic design is a well known process in the field of business. The success of a business lies on the advertisement with attraction. To bring attraction the creativity is much important. To enjoy the creativity one can appoint a graphic designer as his employee but the frequent need of graphic design would not occur. Hence the appointment of a graphic designer is waste sometimes. The way to satisfy the need of a company on graphic design they can outsource the graphic design through some familiar concerns.

When we depute the graphic design for outsourcing, the person taking contract to do the graphic design will certainly workout the nature, prospects and advantages, theme and sources of the company or concern. Complete study over the company will help the outsourced graphic designer to create something impressive advertisements, postures, television display, and web designing and so on. The entire responsibilities are deputed through outsourcing of graphic designs. As such quality in graphic design can be expected with confident.

Marketing a product need lot of technical support from advertising agencies and that too from graphic designers. A well settled graphic designer can quickly observe the thoughts and means of a manufacturer or seller and will set the design accordingly. So much the impression created in the graphic design that much customers will step into the organization from which the graphic design is delivered. The moment the graphic designs attracts people, the concern get enquiries and sales. Outsourcing in the field of animation is gradually increased. The most advantage of outsourcing graphic design is that the cost spent is reduced and expected quality is achieved. The outsourcing process in graphic design has increased tremendously. Especially in US, East Asia and well developed countries have started outsourcing the graphic designs in large numbers.

In communication wing, yellow page makers set their task of graphic designs to outsourcing. The main object of the companies or manufacture is to cut the cost of labor by outsourcing its process to some familiar outsourcing companies. On the other hand a company or manufacturer can depute his time entirely on business developments. Graphic design outsourcing is globally needed as the market strategies urges lowering the cost of production and other expenses related to that. By outsourcing the graphic designs of a company the image and identity is increased so much as people could have enquiry about the product and started buying.

In modern days people are waiting for something new. To satisfy their needs, a manufacturer has to deliver his product by giving proper and impressive advertisements and publicity. Where to get such creative advertisement? The only source is from graphic designs. A wise man will give all his graphic designs to outsourcing and sit comfortably without worrying for labor problems, salary factor, and many more. World wide opportunities are there in plenty for graphic design outsourcing to meet out the large number of opportunities in this field. In film industry outsourcing of movies with creativity is most welcomed by viewers. Now in internet we can see so many companies opting themselves for taking contract in outsourcing of graphic designs.

In-House Inefficiencies – The Advantages of Service Outsourcing

The rise of inefficiencies that prevail in many business send many business owners on a quest to outsource product manufacturing or specific service requirements. When confronted with the opportunity to outsource, many opt not to pursue this direction because there is a feeling of loss of control. Used correctly, the ability to use outsourcing can improve operational performance and individual job quality no matter whether the outsourced activity provided is product or services. What has made this approach popular with some companies and avoided by others? Why is outsourcing a good idea for companies? Is outsourcing a viable strategy given the business environment of today? If so, to what extent is it appropriate for your business?

The idea of outsourcing has grown beyond the idea of product or component part production. The initial concept of supply-chain management coupled with lean manufacturing techniques support outsourcing components and can be illustrated well when reading Henry Ford’s comments on the subject:

“The task of putting business on better foundations depends on every department of the business and not alone on the manufacturer.”1

The resulting effects on industry have been substantial for large manufacturers and especially for businesses with smaller work forces where the ramifications have been substantial. In many cases, their ability to use this approach has fostered their competitive advantage and provided a sustained period of business growth.

Businesses are increasingly hiring specialized service firms that perform services that they used to provide for themselves. A company’s ability to specialize or provide a more sophisticated service creates opportunities not previously available for many businesses. Growth in the underlying need for services is driven by several factors including the need for increased sophistication, globalization, and the ever-increasing aspect of management complexity.2 Specialized forms of services have proliferated, as has the complexity of needs in such established service industries as advertising, accounting, consulting, information systems, market research, and investment banking. The companies that are able to create advantages by working smarter and staying cost competitive will be the companies that will have the ability to survive the increased competition, aggressive pricing, and sustain the threats from international competition.

Are products and services affected in the same way? Specialization and sophistication are occurring in both areas. However, services are actually being de-integrated or removed from the businesses. This de-integration result actually is a net increase in service provision being provided to the organization. The trend in graphic arts industries is toward integration, or in-house provision, though this industry is considered non-traditional and does not reflect the trend by the majority of other service industries.3

By far the greatest reason for lack of outsourcing within any industry, no matter whether product of service related, is the fear of loss of control. The pervasive thought that the product can be produced better or the service performed better can be an inherent part of a business culture that can cause stagnation and large inefficiencies. Individual managers or owners will many times decide that the opportunities to vertically integrate demand in-house functions to remain “in-house”. Thus maintaining quality standards that cannot be supposedly matched by outside sources or incur increased costs that will impact the sale of the product or service.

The services that are being provided have grown and are continuing to grow due to three underlying factors: the specific need for increased sophistication by service providers, the de-integration of services previously performed as an in-house function, and the privatization of public services.4 Many of these service firms have reinvented themselves during the last decade due to the increased use of information technology. It has allowed increased productivity from the individuals that are part of the firm as well as increased the amount of information and number of services each service firm can offer to their clients. Many of the services are now automated which provide immediate access without a need for direct customer interface. The airlines have taken automated ticketing to new heights via the telephone and the Internet. The new technologies are both the cause and effect of changes the industry structure and the source of major competitive advantage in many service industries.5

Multi-service firms allow their clients to tap into a broader selection of available services. At the root of the growth of these firms is a type of systemization that allows efficient and consistent replication of the services at multiple clients due to standardized employee procedures, internal methodology, automation of the actual service tasks performed by the individual. This has spawned another critical aspect that allows firms to narrow their focus of specialization for their clients. Take for instance, a consulting firm that offers multiple service functions but has true expertise in only a couple of areas. This broad approach has given way to increasingly specialized services such as human resource management, compensation modeling, and strategy definition to name just a few. Specialization leads the service firms to a much more narrow focus which provides better service in the specific areas of client need.

There are several advantages of having a narrower focus within the service firm. Among them are the economies of scale that the service firm can gain with the specificity of a narrow focus area. For example, diagnostic service programs that can be run via a phone modem at a remote location of the client can check software programs and often even correct the problem. Other types of enhanced communication can provide data processing, telemarketing functions, or answering services possible. These are closely related to the centralization needs of the client and are specifically scale-sensitive meaning that activities provided by the service firm are adapted to the client’s need to service their clientele on a regional, national, or on a world-wide basis.

Additionally, the aspect of competition and focus are potent advantages for the outside service provider. In-house service departments are at the very least cost centers for the business. This is not to say that an in-house service facilitator cannot be profitable. It does, however, mean that the policies, procedural methodologies, and accomplishments should be regularly measured to not only justify the existence of the department, but also provide adequate pressures and performance incentives when faced with outside service alternatives.

At the same time, in-house service departments do face inherent constraints.6 Understanding barriers that are constraining for a business helps ownership and management better evaluate the performance requirements necessary for an in-house service department to function well. Given the limitations, such as compensation structures and employee benefit packages, those responsible for making the decision should probably opt to outsource the services instead of having them handled internally.

“In-house service units are housed at expensive locations, subject to corporate salary structures and benefit plans, constrained in some cases from using part-time workers, and live under other guidelines that are inappropriate for the nature of the service function provided. The independent service provider, conversely, tailors every aspect of its value chain to the particular service involved.”7

The concept of increased cyclicality should be considered by the organization facing inefficiencies. Cyclicality increases the inefficiency of maintaining a permanent service function in-house which provides companies alternatives to converting a fixed cost into a variable one.8 They need only to call on these companies, as the organization requires their services.

Recognized Opportunities to Outsource

Similarity of Service Needs – The aspect of service needs that organizations require have similarities whether competing at the local level or on a global scale. Some service needs may be industry specific, or even segment specific. For example, consulting services tailored to niche industries require years of expertise to understand specific nuances that affect industry trends requiring specific client recommendations. As the demand for services globalizes and competition becomes greater, the actual service performance at the local level may provide a cost advantage to the client. This allows for competition to be somewhat “equalized” for the local firm regardless of a whether the competing firm is considered to have global reach.

Mobility of Buyers – With increased information flow throughout the world, the opportunity for global service firms increases at the local level. In past years, buyers were confronted with minimum options when faced with the need to take in-house services out for bid. The buyer’s perspective has increased substantially providing the buyer’s organization opportunities today that may have existed in prior years, but were not available or familiar to the buyer. Additionally, the aspect of paying in different currencies is continuing to be less of a concern since many trading blocks have adopted a common currency thus relieving the concern of loss due to currency fluctuation. The Euro is probably the best and most recent example of this.

Rising Economies of Scale and Geographic Scope – The advantages that drive local service competition to open multiple offices or locations are prevalent at the global level as well. It is easier today than at any other time in history for companies to establish an international presence for services that can be outsourced. Economies of scale allow these companies to spread costs in areas such as information technology, personnel training, and capabilities to enhance topline sales revenues. The advantage of global positioning by an organization allows for growth in areas of brand cache, local personnel participation with global perspectives, and the overall advantage of serving other multinational firms similar in scope.

Greater Mobility of Service Personnel – The aspect of telecommuting has grown in recent years because many people prefer to work from home, or are unable to make the commute efficiently to the home office of the service firm. In-home workers are providing companies the opportunity to reap large benefits on productivity and employee satisfaction unobtainable in prior years. If travel is required, the ability to get to an international location is relatively easy and customer contact is relatively short. This again provides economies of scale for the employing organization which enhance the solution for their client.

Information Exchange – Buyer interaction at a distance today is to be expected given the overwhelming amount of information available via the click of a mouse. Samples are available via overnight delivery services. Emails and telephones provide instant access to other individuals needed in the buying process. Employee assessment and testing are available through many consulting service firms where the client has access to use licensed information technology at their discretion and the consulting firm has virtually no client interaction, unless required by the client, except to invoice for the services. This type of service function allows for more access to remote buyers whether face-to-face or not. Employee behavioral assessments illustrate this point well.

Wide Disparities in Cost or Quality – Huge differences remain in costing methods and overall quality of services that can be outsourced. This is true at both the domestic and international level. It is becoming easier today to setup service facilities in India or China due to availability of personnel and the overall cost of the facility itself. Many countries have not made the jump to service outsourcing from manufacturing outsourcing as yet. However, as the world’s population continues to grow and the state of development by country is opportunistic, the proliferation of service industries will be advanced.

Buyer/Supplier Relationships – The relationship between the buyer and the supplier is pivotal in the use of service firms for the organization. There are two considerations that should be taken into account when mentioning this aspect. The first is without a local manufacturing base, the demand for outsourced services will be limited. The second is the actual structuring of the manufacturing sector which can strongly influence the types of services to be provided. A certain amount of sophistication is required in order for specialized service firms to exist and be successful such as specialized software application companies or consulting services.9 On the other hand, economies of many third world countries that are non-manufacturing based have no need or demand for out-sourced services. The point being that the more sophisticated service-based economies is more apt to take advantage of the out-sourcing opportunities.

Outsourcing is truly a quality of life issue that faces individual owners and corporate business entities alike. Mature industries where specialized firms are available to be used, should determine what their core competencies are and how they impact exploitation of the firm’s competitive advantage. The organization’s core competencies should be protected at all costs.

Firms are demanding more opportunities to use outside services that provide increased product quality or sophistication of services. The opportunity to find specific areas that will benefit from these services can make a company more profitable, time efficient, and productive. Employed as a viable company strategy, outsourcing will enhance an organization’s ability to sustain upward growth patterns and explore new opportunities by using redefined human resources within the business.

Outsourcing Transcription Services

Outsourcing is subcontracting a process to a third party company. The decision to outsource is often made in the interest of lowering the cost or making better use of time and energy or making more efficient use of capital and resources.

Transcription basically means the act of transferring spoken word into typed text. It provides you with an easy reference version of recorded material. Hiring someone in-house to be devoted towards transcription increases overhead costs. The service needs to be done accurately, so outsourcing transcription services with experience is a good move to most businesses. Outsourcing of transcription process nets in a huge operational cost advantage.

Outsourcing transcription services is gaining popularity and companies are fast realizing the advantage of the process. With an increasing number of low cost, high value destinations popping up worldwide, companies are weighing up the pros and cons of outsourcing the entire process to reliable third party agencies.

Improvements in technology have expanded the marketplace. Through the use of Internet and digital and telephone dictation, transcriptionists no longer need to be in close proximity to the office. As a result, many transcription companies are outsourcing their work overseas to take the advantage of both lower cost and easy service.

Benefits

1. Outsourcing transcription services help companies reduce capital investments, expenses and overheads, resulting in saving and increased profitability.
2. Companies that outsource transcription services are free to focus on the core business activities.
3. Considerable amount of saving in cost is one of the main attractions of outsourcing transcription services.
4. Improve revenue within your department
5. Get the work in quick turnaround time
6. Free from the hassles of managing employees and records
7. Reduce liability and business risk
8. Improve customer satisfaction through efficient and timely processing of requests, service changes and projects

Outsourcing transcription services allows increased capability. By outsourcing a critical task that requires professional knowledge, the company can better focus on its core competency and enhance productivity. Outsourcing helps companies to avoid capital expenditure, which is especially relevant in non-core areas that may need new systems and upgrades. Again by outsourcing, companies are relieved of the responsibility of recruiting for transcription jobs and training a dedicated staff for that purpose.

There has been a significant growth in the outsourcing industry in many developing countries including India because of their expertise in reducing cost while enhancing the quality of service.

In these challenging times of tight budgets, compressed deadlines, exploding amount of information, managing transcription yourself can cost you in many ways. That’s why outsourcing transcription has become such an attractive solution for many. And if done correctly, it is a pain-free process that gives you the freedom to focus on many important things.