Why Should Your Company Outsource?
Author: Robert Newman
If you are an executive of a small or mid-sized company, you can take advantage of new outsourcing opportunities to reduce costs, build world-class business practices, rapidly expand your business and increase profitability.
Outsourcing is generally associated with large corporations, massive layoffs and cost cutting. However, the outsourcing game has recently become even more interesting now that the domestic and offshore outsourcing industries are beginning to provide outsourcing services to small and mid-sized companies.
What is Outsourcing?
Outsourcing is the practice of hiring a third party outside contractor to perform some portion of a company's business activities. Outsourcing should be seriously considered when:
- An outside contractor can provide similar or better services at a better price than can be provided internally and
- Those services are not generally not central and critical to a company's main business (Core Business).
By using outsourcing, a company focuses more of its resources on its Core Business while taking advantage of low cost providers who do non-essential functions better and cheaper.
Common Types of Outsourcing.
The two most common forms of outsourcing are called Business Process Outsourcing (BPO) and Information Technology Outsourcing (ITO). These outsourcing services are offered by companies inside the United States (Domestic Outsourcing) and outside of the United States (Offshore Outsourcing).
Business Process Outsourcing (BPO).
Business Process Outsourcing grew popular in the late 1990s when cutting costs and managing quality became a paramount goal to large corporations competing in the worldwide marketplace. When a company outsources part or all of its Non-Core Business, they are typically engaged in BPO. Some common areas to look for BPO opportunities are in Human Resources, Sales, Marketing, Finance, Accounting, Customer Service, Procurement and Business Administration.
Small and mid-sized companies have often utilized BPO for payroll processing through ADP or one of their competitors.
Information Technology Outsourcing (ITO).
ITO was one of the first types of Business Process Outsourcing. Its origins began in the late 1960s when service bureaus provided excess computer time and ran applications on large mainframe computers for large corporations. As computers grew less expensive than people, ITO companies focused on developing custom software for corporations or providing other value added services. IT Outsourcing has become so widespread and specialized that it evolved into its own separate category of outsourcing. Some common areas to look for ITO opportunities are in Infrastructure, ecommerce, Data Processing, Network Management, Application Service Providers, Telecommunications, Data Security and Software Development.
Firms specializing in BPO and ITO may be located inside of the United States (Domestic Outsourcing) or in India, the Philippines, China, Eastern Europe and Russia (Offshore Outsourcing). India is the leading offshore outsourcing location for companies located in the United States as it is an English speaking country and turns out over 300,000 college graduates each year. In addition, many Indian nationals have been trained in developing and maintaining systems in the United States and have been trained to be world class IT professionals.
Robert Newman is an attorney at the Business & Technology Group @ Jones Garneau LLP. Mr. Newman helps executives successfully raise money and purchase other companies by providing practical legal advice about securities, M&A and technology law. Prior to becoming an attorney, he served for over ten years as an IT consultant and manager at various major banks and financial institutions. He may be reached at:
RNewman@jonesgarneau.com or at 1-800-989-8260.
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