The Total Cost of Outsourcing: The Rural Alternative

How to use outsourcing to your financial and operational advantage

In today’s tough economy, businesses of all sizes and industries are seeking new ways to maximize profit margins. Outsourcing has been a staple of the corporate diet for years as we search for better and cheaper ways to work.  Outsourcing, however, has its costs and operational issues. This webinar shows how the cost of offshoring compares to rural onshoring.

Attend this free webinar to learn:

  • The Total Cost of Outsourcing (TCO)
  • The different types of outsourcing
  • Cost of Outsourcing
    • Labor
    • Transition
    • Operation
    • Management Reserve
  • Evolution of outsourcing – Follow the money
  • Rural onshoring alternatives
  • 3Ps of successful rural outsourcing

The Total Cost of Outsourcing: The Rural Alternative

How to use outsourcing to your financial and operational advantage

January 7, 2010 | 2pm EST / 1pm CST / 12pm MST / 11am PST


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About Your Presenter

Martin is an Executive leader with over 25 years of Engineering & IT management experience at Fortune 100 firms. He is a certified Lean Six Sigma Black Belt with over 12 years of experience in the selection and operation of ITO operations in Europe, Asia, North and South America. Martin specializes in identifying and implementing the processes and controls necessary for successful onshore, nearshore and offshore performance and profitable growth.

About the Presenter:


Martin J. Gardocki

COO and acting Vice President
of Ohio, Indiana and Kentucky




Webinar:

The Total Cost of Outsourcing:
The Rural Alternative

Date:

Thursday, January 7, 2010

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12pm MST / 11am PST

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December 10th, 2009 by May Advincula Leave a reply »

In an IMF Web Forum, Martin Gardocki from Rural America Onshore Sourcing, discussed the rural alternative in the total cost of outsourcing. Rural America Onshore Sourcing is responsible for finding and aggregating rural talent to provide customers with contract assistance as required for their businesses.

The different types of outsourcing that exist include:

  • USA Urban Outsourcing (domestic, urban firms contracted to provide a service)
  • Offshoring (contracting with firms in places such as India and China)
  • Nearshoring (outsourcing to firms in Central and South America)
  • USA Rural Onshoring (domestic firms in rural communities or distributed rural teams contracted to provide a service)

According to Gardocki, “the opportunity of outsourcing is to actually use the capacity and the capability of the outsourcer to drive even further benefits going forward.”

There are 4 basic costs associated with outsourcing which include the following:

1.      Labor (cost of personnel and source of savings generated through arbitrage)

2.      Transition (cost of identifying, negotiating, and moving work to the outsourcer,

3.      Operation (ongoing cost of the relationship)

4.      Management reserve (cost of managing the unexpected)

ARBITRAGE: “The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time.” –From investopedia.com

Gardocki explains that the evolution of outsourcing began with contracting with urban vendors where good work came at a premium price. With offshore sourcing there was significant cost savings in comparison to urban vendors, but the overhead costs of governing communication and productivity generally add themselves to the equation. Gardocki states, “As people have become more comfortable with the offshore model and companies become more global, the whole concept of having captive offshore development centers has crept up over the last 5-10 years. Basically [you avoid] the middle man markup and [do] it yourself.” In Gardocki’s own experiences, he has known many owners of small to medium sized business where low cost providers did not necessarily work out and their productivity dropped dramatically for every transition which delays the promise of ongoing benefits and a wealth of capability and capacity. According to Gardocki, what is more alarming is the effect on the customers because “they feel the pain in delayed delivery, they feel the pain in increased costs, and basically you’re the one who has to tell them why,” Gardocki explains. As a result, people look for other areas in which they can reduce some overhead of the operation and still get some of the savings.

The Rural Alternative involves domestic firms in rural communities or distributed rural teams contracted to provide a service. There are millions of people willing and able to work from their homes or local offices with strong work ethic and speak the same language. They are technically skilled to meet the demands of today’s information technology and business process outsourcing environment.

The “3 Ps” of rural onshoring include:

  • Proximity to broadband (access to internet at speed capable of sustained operation)
  • Population Density (depending on the skill and number of personnel required, you can work in a single community or require personnel across multiple regions or states)
  • Process disciple (dispersed or remote teams require process rigor to ensure efficient operation. This includes the infrastructure to support collaboration, project management, document management, and standards).

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Daily Outsourcing News

September 21, 2009

Taming the data centre

Data Center outsourcing enables companies to achieve cost and resource efficiencies, allowing their internal staff to focus on achieving core competencies, while streamlining or restructuring their IT and operational environment to optimize their cost basis.

While maximizing cost savings and productivity are always important business goals, they are particularly critical to keeping a competitive edge in a challenging economy. However, meeting these goals is often difficult for companies whose resources are spread thin, and are too busy managing and maintaining the continuously evolving IT infrastructure to concentrate their attention on more strategic initiatives.

When considering outsourcing, there are a few key areas that need to be explored, particularly which areas are key targets to outsource, and how to choose the outsourcing provider that best meets your company’s needs.

// <![CDATA[Outsourcing Services | IT Services]]>

Outsourcing gets social

September 17, 2009

I was at the Groucho club in Soho for breakfast yesterday, for an event on social media, rather than any champagne with the stars.

Kenyan IT and business process outsourcing firm KenCall were the hosts for the day, and it was interesting to see how social media is entering into the regular world of IT and business services.

Kencall founder Nik Nesbitt talked about how communities on Cell Fish are run by his team in Nairobi, using a combination of chat and forum management – almost anything but the traditional voice-based contact centre.

So this is starting to get interesting. Not just because KenCall is from Africa, but also because firms are starting to outsource their online social presence. During the discussion, there was a consensus that the way large firms are doing social media at present cannot be sustained. I have my own example; when I tweeted a complaint about my BT broadband line at home, BT were all over the problem and had it resolved super-fast, because they have people monitoring Twitter. That’s going to be hard to scale up.

But I’m really interested in the merger now between the social world and the closed shop of outsourcing suppliers. They are going to have to operate in new, unusual, transparent ways and they are not all going to like it.

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There are definitely advantages, but make sure you make an informed decision!

There are a lot of advantages to outsourcing, however, there are also some disadvantages. Since this is such a huge issue, and such a large decision for you to make regarding your company, you should make sure that you take a good look at both sides of the issue before you make your decision. Make sure you know exactly what you stand to gain or lose by outsourcing your work.
First of all, the advantages of outsourcing for your business are that you’ll be able to get some of the less important jobs done for cheaper. For instance, if you’re finding that you do not have enough money in your budget to make necessary changes in order to keep your business afloat, then you should probably find a way to reduce the amount of money that you’re spending.

Another advantage of outsourcing is that there are actually other companies and places where you can get the work done better than you are already in your own company. Not only that, but if you have a company that requires a large number of different products or services in order to function, it might take less time for you to find a good outsourcer than it would take you to train new people.

 

There are a few disadvantages to outsourcing, however, and you should definitely take those into account as well. For one thing, if you outsource, it means that you’re going to have to work very closely with the company that you outsource your work to. Otherwise, you won’t get the finished work as soon as you need it. Having another company involved in your business might get tiresome after a while.

Another thing that you should consider is that depending on where you outsource to, it might hurt your business. This is generally only a big deal if who your customers are really matters, or if you’re a very small business. Some people shop at small businesses because they’re local – and if you’re a business like that, then outsourcing might be to your disadvantage.

In the end, however, the question of whether or not outsourcing is right for your business can only be answered by you.

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HMRC reported to be mulling the idea of outsourcing tax return processing to India

Written by Accountancy Age

Accountancy Age, 07 Aug 2009

HMRC is thought to be looking at outsourcing the processing of tax returns to foreign companies in another drive to reduce costs, it has been reported.

The tax body and its Aspire consortium of IT contractors, which includes Capgemini and Fujitsu, are studying a range of options in order to save £200m a year, one of which is the offshoring of tax returns, most likely to India, reports tax-news.com

Although there are not yet specific proposals in relation to this option, it will raise concerns over the privacy of data, especially after the same body lost the details of 25 million people in 2007.

However, HMRC has insisted that under the terms of the Aspire contract, IT cannot be delivered from outside the UK, and that there are no plans to change this restriction.

There are many good reasons for your business to use outsourcing.  The general idea behind the concept of outsourcing is that you can do anything you need to do extremely well without having to invest enormous start-up costs in equipment, financing, training employees, or other expensive options.  Outsourcing allows you to be able to get the best product or service to your customers without having to go through a time-consuming and potentially risky process to get there.  You can hire elite professionals to do just about anything without having to concern yourself with raising an enormous amount of capital or put in a huge amount of time to try to get your firm up to a level where you are competent at serving your customers in that particular area.

 

Another reason to outsource is the flexibility that it allows you.  There may be times that it makes sense for you to enter a certain niche that you spot, but only for a limited period of time.  Under old business models, this would require you to go through a costly process of getting your organization up to speed in that particular area and then, when that niche had run its course, you would be stuck with all of the capital you had invested in it and you’d need to go through some kind of a readjustment process.  With outsourcing, you have the freedom to enter and exit markets by using highly trained professionals that can do top of the line work when you need it without having to restructure your entire organization to meet demand for a product or service that is fleeting.  This allows you to have a more nimble company, and to go after opportunities that are profitable but my not have been worth it in the past.

 

Finally, outsourcing makes your own organization stronger because it allows you to concentrate on what you do best.  You don’t want employees who are outstanding performers in one area to be spending a large portion of their time performing tasks that they are merely average at.  The more you can stay focused on your core competencies, the more you gain an edge on your competition in those areas.

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When many business owners hear the word “outsourcing” they cringe. A lot of people are sensitive to the words “Made in the USA,” and there are a lot of business owners who take pride in having all of their work done in their own country. It’s only natural if you’ve been born and raised in the United States, and built up your business here, that you feel uncomfortable at the thought of having your projects being done overseas, not to mention the idea of sending some of your money overseas as well.
But in reality, outsourcing doesn’t have to be that way. Outsourcing does not require that any of the work involved be done overseas. By definition, outsourcing simply means having someone other than an employee of your company do the work for your company. It means nothing more and nothing less, it can be a very wise business strategy depending on what your needs are, and it certainly doesn’t mean that you have to ship any of your business outside of the country. Quite the contrary; it may be easier to outsource to people and business in the United States where you’re more comfortable knowing that they have to respect the same laws and customs that you do.
In fact, there are numerous professional companies right here in the United States that offer many different types of outsourcing. Services ranging from IT Services work to Socail Media Marketing to call center duties to collections to just about any task that you can possibly imagine your business engaging in are available for outsourcing right here in our own country without ever having to look across borders for assistance. No matter what type of project you have on your hands, you can always find someone right here in the USA to tackle it for you. It isn’t just a way to help out the American economy, either; there can be substantially fewer obstacles to doing business with someone who is familiar with our laws than there are when you are going overseas and dealing with sometimes complicated language, tax, customs, or cultural barriers. Harnessing the power of outsourcing without the potential pitfalls of having to deal with someone in another country has a lot of advantages.

To learn more about US outsourcing visit Rural America Onshore Sourcing

April 28, 2009CIO — One would think cash-strapped companies would find a heavenly match on foreign soils with plentiful, cheap labor. But that would be the romantic notion and not necessarily the reality. “Companies often ‘plan for the wedding, but not for the marriage,”’ says Dalip Raheja, chief executive officer and president of the Mpower Group. Now that offshore outsourcing is roughly a decade old, it’s time to evaluate lessons learned and tally the real costs before renewing any vows.

The Honeymoon Is Over

“After a period of explosive growth in offshore outsourcing many companies are moving past the learning curve when it comes to the tangible costs of moving services and production offshore,” explains Raheja. “Experience has built more certainty around what was once considered previously ‘hidden costs,’ or costs related to transition, development, selection, etc., which could easily cancel out any financial benefit of doing business offshore.”

Now that time has told its tale, flaws are revealed and divorce becomes an option. One example, Delta’s CEO, Richard Anderson, announced this month that the airline canceled its outsourcing to India because its customers were very vocal against foreign customer service agents. The struggling airline desperately needs happy customers so it responded to the complaints.

Often it is not simply the loss of disgruntled customers, a loss bad enough in a down economy, but loss in efficiencies and productivity as well that leads to the severing of offshore outsourcing relationships.

“We often find that outsourced agents are not trained as deeply as agents who work internally for an organization, and often lack the tools to do a thorough job for customers,” says Dr. Miriam Nelson, senior vice president of Aon Consulting, a global HR/human capital firm. “We hear them rushing through calls, merely repeating the same troubleshooting steps, since they do not have that deeper understanding necessary to explain issues in a different way for the customer.”

When call center work is outsourced to an offshore firm, service drops even further according to Nelson. “Offshore call centers are not only challenged by being in an outsourced position, but they also have to overcome language barriers and cultural disconnects,” she explains. “When we benchmark offshore service against onshore service, offshore scores much lower.”

The cost of poor service translates to hard currency losses for any corporation. One example: Aon recently observed an outsourcer in the Philippines and found the following, according to Nelson:

  1. 41 percent of all calls are placed on hold. The average total hold time is 331 seconds. Agents are typically looking up information or speaking with other departments during these holds. Reducing the average hold time by 30 percent alone would result in an estimated annual savings of $384,000.
  2. Agents are not speaking clearly on 56 percent of calls. The average talk time on these calls is 232 seconds longer than necessarily. This represents an estimated annual cost of $1,219,594 to the organization.

 

Read the rest of the story at  http://www.cio.com/article/490939/The_Real_Cost_of_Offshore_Outsourcing?source=artrel_top

 

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