Effective Outsourcing & Offshoring

Definitions

• Outsourcing is the delegation of tasks or jobs from internal production to an external entity (such as a subcontractor). Most recently, it has come to mean the elimination of native staff to staff overseas, where salaries are markedly lower. This is despite the fact that the majority of outsourcing that occurs today still occurs within country boundaries, especially in North America. It became a popular buzzword in business and management in the 1990s.

External Links

• Computerworld Knowledge Center
  • Outsourcing Special Report TOC
• 2004 ITtoolbox Outsourcing Survey
  • Registration Required
  • http://peoplesoft.ittoolbox.com/research/Dell1_survey.pdf

Views

What's your view?

• From an employee or jobseeker perspective, outsourcing (and particularly offshoring) is a bad thing.
• From an SOHO company's perspective, outsourcing is a good way to compete to gain marketshare from companies who do not outsource to cheaper labor pools.

+ It all depends from a customer's perspective: price, security, privacy, unspoken risk due to global politics, global climate, regional issues, communications barriers, time zone barriers... the one piece not covered by promoters or outsourcing or offshoring.

Alvin's View:

Anyone who is a consultant is an expert outside the company, hence an outsource to a company. If all outsourcing is bad, then you cut off your opportunity to consult. So outsourcing can be good. The bad part is when outsourcing is not done properly.

Manufacturing has gone through this and has learned, painfully, that while it may be cheaper to have the labor outsourced, there are other costs, risks and customer satisfaction to deal with. These typically aren't considered very well when looking to outsource, or most importantly, outsourcing offshore.

Labor costs can be lower with the outsource, but how much time does it take to bring the outsource up to speed? Once up to speed, how much management of the outsource team is required? If the outsource team is offshore, what is the cost of permits, travel, visas and other sundry items to deal with the offshore team? What is the view of the customer on the outsourcing? (this question is tricky in that the questions are typically asked in terms of cost and not anything else). How secure is the intellectual property and customer data?

These issues are what you have to answer as a consultant, an on-shore outsource team or an off-shore outsource team. Out sourcing will continue, the key is in what you do to prepare for it and compete effectively.

Interesting book I've been reading to review for Pearson Publishing: "OUTSOURCE: Competing in the Global Productivity Race", Edward Yourdon. The book looks from the bean counter management point of view with all of the justifications for going offshore.Understanding the rationale helps in determining where you fit in with the outsourcing game. Know the issues and weakness of the offshore as well as their strengths and you can better define what you can do to be employed on-shore. Plan on being one of the outsource on-shore consultants or companies and compete in the global market by filling the need the off-shore group cannot.