BPO Tactics

TOP FIVE TACTICAL REASONS FOR OUTSOURCING

One time applications
Applications that need to be developed or modified for a specified time require high manpower resources at one point of time. For this the organizations need to ramp up/ramp down in a relatively short notice. This in-turn is expensive. For this outsourcing is the best solution. For e.g. Y2k, Euro, porting from one-platform to another etc.
 
 Reduce or Control Operating Costs
The single most important tactical reason for outsourcing is to reduce or control operating costs. Access to an outside provider's lower cost structure is one of the most compelling short-term benefits of outsourcing. In a recent outsourcing Institute survey, companies reported that on average they saw a 9% reduction in costs through outsourcing.
 
 Make Capital Funds Available
Outsourcing reduces the need to invest capital funds in non-core business functions. This makes capital funds more available for core areas. Outsourcing can also improve certain financial measurements by eliminating the need to show return on equity from capital investments in non-core areas.
 
 Generate a Cash Infusion
Outsourcing can involve the transfer of assets from the customer to the provider. Equipment, facilities, vehicles and licenses used in current operations all have a value and are, in effect, sold to the provider as part of the transaction, resulting in a cash infusion
 
 Secure Resources not available internally
Companies outsource because they do not have access to the required resources within the organization. For example, if an organization is expanding its operations, especially into a new geography, outsourcing is a viable and important alternative to building the needed capability from the ground up.
 

IT's HARD TO BUCK THE OUTSOURCING TIDE IN IT

Outsourcing is a decades-old business, but lately it has spread like an airborne virus in corporate IT departments. And few IT executives are willing to risk their jobs to fight it, according to a survey conducted by PC Week Executive and the Society for Information Management.
Nearly three in four corporations surveyed outsource one or more IT functions—and the often-controversial practice still hasn't peaked. Only 8 percent of senior IT managers interviewed say they are neither outsourcing nor studying it. A desire to augment IT staff with highly skilled developers is the most common reason that organizations turn to outsourcing, the survey shows. In a sign of the times, PC and network maintenance is more often outsourced than mainframe or legacy systems. The PC Week Executive/SIM survey, conducted by telephone in late June 98, asked 100 senior IT executives to evaluate the pros and cons of outsourcing. The responses indicate IT managers are learning to accept outsourcing despite sobering concerns about the “anxiety and stress” it can cause them and their staff. The senior IT executives who engage in outsourcing, and the outsourcers, are scrambling to invent new kinds of partnerships aimed at improving bottom-line results. “The interest in outsourcing has shifted from cost containment and cost reduction to business growth and increasing market share,” said Mike Bauer, director of technology planning services at Electronic Data Systems, in Plano, Texas. “To say you're avoiding outsourcing is to avoid a tool,” said Chuck French, manager of consulting in Meta Group Inc.'s sourcing strategies practice, in Reston, Va. “It's similar to avoiding using a PC or some other form of automation.” 

CHOOSING THE RIGHT BSP

Globalization has not only broken the traditional business boundaries across countries but also opened vast markets for global companies. But along with this, it has brought vast competition and has forced many companies to concentrate more on their core business and outsource the non-core business practices to BSPs. A closer look at the current state of the market suggests that companies need to do a lot of homework before choosing a BSP for their non-core businesses. This white paper addresses the key considerations that companies need to make before choosing a BSP.